The naira has made a notable comeback against the US dollar in the first half of May, dropping significantly below N1,400/$.
In fact, it is now testing lower support levels like N1,350/$ mark.
The currency may strengthen below the N1320/$ area if the NGN bulls maintain their bullish momentum.
According to recent news, there has been a significant increase in Forex inflows from foreign investors, exporters, and oil companies.
Market participants explain that the attractive returns on the Nigerian debt market attracted foreign investment, leading to the availability of Naira supporting funds.
There is a gap between the Nigerian foreign exchange market and the black market, but it is gradually narrowing between the rates in the official and parallel markets. The street rate was about N1,404/$, while the official rate was N1,356/$.
The narrowing difference between these two rates is a positive sign that the markets are coming together.
The US Dollar Index (DXY), which gauges the greenback’s strength against six global currencies, is trading at about 98.1 in the London trading session, maintaining some bullish momentum after posting losses on Friday.
The US dollar strengthened amid rising risk aversion after Iran and US President Donald Trump rejected each other’s most recent peace proposals to end the Middle East conflict. US President Trump rejected Iran’s most recent peace proposal, calling it “totally unacceptable”.
Iranian state television reported that an Iranian official stated that Tehran’s response focused on resolving the conflict on all fronts, especially in Lebanon, and addressing the security of shipping routes through the strait.
However, no information was given regarding how or when the vital waterway could reopen.
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The protracted conflict in the Middle East and the precarious ceasefire between the US and Iran may sustain demand for the US dollar as a haven, which could have an immediate negative impact on the major currency pair.
The dollar climbed in Asia on Monday on signs that talks between the United States and Iran were deadlocked, leaving the vital Strait of Hormuz all but shut and sending oil prices higher.
President Donald Trump on Sunday rejected Iran’s response to a U.S. proposal for peace talks to end the war, saying Tehran’s demands were “totally unacceptable.”
An Iranian plan sent to the U.S. stressed the need for an end to the war on all fronts and the lifting of sanctions on Tehran, along with reparations and a recognition of Iran’s control of the Strait, Iranian media reported.
Iran has effectively shut the Strait since the war started late in February, choking off a corridor that normally carries around a fifth of the world’s oil and gas.
The dollar benefited as a store of liquidity during risk events, edging up 0.3% on the Japanese yen to 157.10 yen , while the euro dipped 0.28% to $1.1754 .
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