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WDAS: Naira appreciates as CBN increases supply by 66%

By Babajide Komolafe, with agency report

The Naira apprecaited in both the interbank and official segment on Monday following 66 per cent increase in foreign exchange suplly by the Central Bank of Nigeria (CBN).

The Naira gained 34 kobo against the dollar at the official segment as the exchange rate fell to N153.05 per dollar from N153.39 per dollar on Friday.

The appreciation was occiaioned by 66 per cent increae in amount of foreign exchange sold by the apex bank from $300m to $499.89m in a bid to clear backlog of unsatisfied demand.

This impacted on the interbank foreign exchange market where the exchange rate fell to N155.6 per dollar from N155.85 per dollar, hence 25 kobo appreciation for the naira.

In the international foreign exchange market, the British pound weakened against the euro as traders scaled back bets on when the Bank of England will raise borrowing costs.

The U.K. currency was within one cent of the lowest level since April 5 against the dollar as short-sterling futures rose.

A report tomorrow will show inflation accelerated in April, according to a Bloomberg survey. Minutes from the Bank of England’s May 5 meeting will be released on May 18 and will show how policy makers voted as they held rates at 0.5 per cent.

Home sellers raised asking prices to the highest since 2008 this month, data showed today.

“The data this week should continue to paint a picture that the U.K. is experiencing a persistent inflation overshoot and very weak activity, and as a result the Bank of England is in a difficult position,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.

“We expect one rate hike toward the end of this year.”

The pound fell 0.5 per cent against the euro to 87.58 pence per euro in London. It rose 0.3 per cent against the dollar to $1.6237.

Sterling reached $1.6147 on May 13, the weakest since April 5, when it touched $1.6091.

The U.K. currency depreciated more than 1 percent against the dollar last week amid weak economic data.

Short-sterling futures rose, pushing the implied yield on the contract expiring in March 2012 down two basis points to 1.22 per cent, indicating investors are pushing back betting on a later rate increase.


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