By Babajide Komolafe, with agency report

The naira continued its downward slide in the official market on Wednesday, depreciating by 15 kobo against the dollar.  The depreciation is  in spite of 33.3 per cent increase in supply by the Central Bank of Nigeria (CBN) and 18.6 per cent drop in demand at the foreign exchange auction.

Foreign exchange demand dropped to $427.99 million from $525.779 million on Monday. The amount sold by the apex bank rose to $400 million from $300 million.

The official exchange rate, however, rose by 15 kobo to N151.9 per dollar from N151.75 per dollar on Monday.
The naira similary fell at the interbank segment but by smaller margin.

The interbank exchange rate rose to N154 per dollar from 153.975 per dollar on Tuesday.
The naira has been depreciating since the begining of the year.

In the official market, it has depreciated by 173 kobo while it has depreciated by 200 kobo in the interbank market and 300 kobo in the parallel market.

On the international scene, the euro rallied to its highest level against the dollar in more than 14 months on speculation the European Central Bank will increase borrowing costs further after raising its target lending rate tomorrow.

The yen tumbled against all of its major counterparts on bets the Bank of Japan will keep interest rates low as the nation recovers from the earthquake and tsunami while borrowing costs in other developed nations rise.

The dollar slid against most of its peers while advancing to a six-month high versus the yen on the view that the Federal Reserve will trail other central banks in ending economic stimulus except the BOJ.

“The assumption in the market is that the ECB will not only raise rates tomorrow, but is likely to engage in further tightening, and that’s really what’s boosting the euro,” said Boris Schlossberg, director of research at online currency trader GFT Forex in New York.

“Japan will remain ultra accommodative for as far as the eye can see, and the rest of the world is slowly but surely moving back toward tightening.”

The euro gained 0.4 per cent to $1.4283 at 9:33 a.m. in New York, from $1.4223 yesterday, after touching $1.4317, the highest level since Jan. 19, 2010.

The yen depreciated 0.5 per cent to 85.30 per dollar, from 84.87, breaching 85 for the first time since September. The euro climbed 0.9 percent to 121.81 yen, from 120.70.

The Swiss franc gained versus most of its major counterparts, rising 0.8 per cent to 91.77 centimes versus the dollar, as inflation unexpectedly accelerated in March.

Europe’s currency has gained 6.9 per cent against the dollar this year as stronger economic growth in Germany and accelerating inflation boosted expectations that policy makers in the 17-member bloc will need to raise interest rates even as nations including Ireland and Portugal struggle to contain debt.

ECB President, Jean-Claude Trichet, signaled on March 3 that policy makers may raise the benchmark rate at their next meeting to curb inflation, which reached a two-year high of 2.6 percent last month.