Lukman Otunuga, Research Analyst at FXTM comments on EM Currencies feel the burn, but Naira remains firm:
It is remarkable how the Naira has remained resilient despite most other major emerging market currencies depreciating against a broadly stronger Dollar.
Could the Naira’s strength be based on optimism over the Nigerian economy, or on repeated central bank intervention?
With inflation cooling to its lowest levels in over two years at 11.61%, Oil prices trading around $70.00 and external reserves at approximately $47 billion, the economic outlook continues to look encouraging.
However, global trade tensions, an appreciating Dollar and prospects of higher US interest rates continue to weigh heavily on emerging markets, including Nigeria.
When considering how the nation remains vulnerable to Oil price fluctuations, its growth prospects could suffer if Oil starts to depreciate.
Investors will direct their attention towards the inflation report scheduled for release on Monday, which is expected to show that consumer prices cooled to 11.05% in June.
Continuous signs of easing inflationary pressures in Nigeria may support expectations over the Central Bank of Nigeria cutting interest rates in H2 to support economic growth.