By Babajide Komolafe
The declining fortunes of the naira continued yesterday as it depreciated by 17 kobo against the dollar in spite 50 per cent drop in foreign exchange demand.
At the close of foreign exchange auction held yesterday by the Central Bank of Nigeria (CBN), the official exchange rate rose to N149 per dollarÂ from N148.83.
Demand for foreign exchange dropped to $280 million from over $400 million in the last auction held last week Wednesday.
Similarly, the interbank foreign exchange rate rose to N151.56 from N150.79, indicating a 20 kobo depre-ciation.
Foreign exchange operators told Vanguard that the depreciation of the naira is a fallout of the over $200 million excess demand in the market last week.
It would be recalled that, last week, the foreign exchange demand unexpectedly doubled to more than $700 million while the CBN sold $500 million.
The resulting demand deficit of more than $200 million triggered a 70 koboÂ depreciation of the naira in the official market and 45 kobo depreciation in the interbank market.
From N148.13 per dollar the precious week, the official exchange rate rose to N148.83 on Wednesday while the interbank exchange rate rose to N150.95 from N150.5 per dollar.
The surge in foreign exchange demand which indicate increasing economic activities as businesses resumed fully for the new year, is expected to continue this week.
On the international scene, the euro advanced from the lowest level in almost seven months versus the dollar on increased demand for risk as U.S. stocks advanced and investors bet the global economic recovery is gaining momentum.
The common currency also strengthened versus the yen after a report showed manufacturing in Europe accelerated more than forecast.
The dollar rose versus the yen as the Institute for Supply Managementâ€™s U.S. factory index increased in January for a sixth straight month.
â€œFor now, investors and markets are optimistic that the global economic recovery is gaining traction,â€ said Omer Esiner, a senior foreign-exchange analyst in Washington at Travelex Global Business Payments, a currency exchange network. â€œThat has prompted some profit taking on the euroâ€™s steep decline from last week.â€
The euro increased 0.4 percent to $1.3914 at 11:30 a.m. in New York, from $1.3863 on Jan. 29.
The currency gained 1.3 per cent to 126.44 yen, from 125.13. The dollar gained 0.7 percent to 90.89 yen, compared with 90.27.
The 14-day relative strength index of the euro versus the dollar was at 29.04 today, staying below 30 for a third straight day, according to data compiled by Bloomberg, a sign the currency may be poised to rebound.
The euro fell 2 percent against the dollar last week, the biggest weekly loss since April 2009. The rand and krone rose today on speculation the economic recovery will boost currencies where interest rates are higher.
The rand strengthened 1.2 percent against the dollar to 7.5363, and the krone gained 0.9 percent to 5.8723.
South Africaâ€™s benchmark rate is 7 percent, while Norwayâ€™s is 1.75 percent.