The naira strengthened further in Nigeria’s parallel market, falling below the ₦1,600 per dollar mark. This came as the U.S. dollar weakened in global currency markets.
Midweek, the naira traded between ₦1,585 and ₦1,590 to the dollar in Lagos, Nigeria’s business hub.
The local currency’s gains reflect improving economic fundamentals. Nigeria’s inflation rate, a key economic indicator, slowed to 22.97% in May, according to data from the National Bureau of Statistics (NBS). This suggests inflation may be peaking.
Meanwhile, tensions in the Middle East added uncertainty to global markets. The recent conflict between Israel and Iran unsettled investors ahead of the U.S. Federal Reserve’s interest rate decision.
Israel has launched strikes against Iran to halt its nuclear activities over the past six days. It also called for a regime change in Iran. Rumors have spread about increased U.S. military presence in the oil-rich region. This raised fears that the conflict could escalate, threatening vital supply chains and energy resources.
On Monday, President Donald Trump demanded Iran’s “unconditional surrender.” U.S. military officials confirmed sending more fighter jets to strengthen forces in the area. A key market concern remains possible disruptions at the Strait of Hormuz, a crucial passage for about 20% of the world’s sea-transported oil.
Recently, two oil tankers collided near the strait and caught fire. The UK Maritime Trade Operations warned about electronic interference affecting ship navigation. Analysts believe that other OPEC members could use spare production capacity to make up for any drop in Iranian oil output.
Iran is the world’s third-largest oil producer, extracting roughly 3.3 million barrels per day.
Despite earlier losses this year, the U.S. dollar has gained about 1% against the euro, Swiss franc, and Japanese yen since Thursday. The greenback’s recovery helped balance out its 8% drop earlier in 2023, which was linked to trade tensions under President Trump.
The dollar remains a safe haven due to its market depth and liquidity.
Investors are now focused on the Federal Reserve’s upcoming decision on interest rates. Recent data shows signs of a slowing U.S. economy, complicated by growing uncertainty from unpredictable policies. Rising oil prices, driven by Middle East tensions, add pressure on the Fed.
Traders expect the central bank to keep borrowing costs steady this year.
Later, the U.S. will release its weekly unemployment claims report. Central banks in Switzerland, Norway, and Sweden are also expected to announce policy decisions.
