The naira traded broadly flat on Wednesday, but outside the central bank’s new target band, a day after the bank stepped up intervention, hurting dealers who had taken short positions on the U.S. dollar.
Dealers lost billions of naira in speculative trades on Tuesday as the central bank sold dollars heavily to help the local currency rebound from another record intraday low to gain almost four percent.
The naira has lost 12.3 percent versus the dollar this year as the falling oil price weighed on the already shaky finances of Africa’s top oil producer.
The central bank, which devalued the currency by 8 percent last week in a bid to halt a decline in foreign reserves, has been struggling to keep the naira within its new band of 160-176 to the dollar.
The naira opened at 183.15 to the dollar on Wednesday, and then quickly firmed by 0.35 percent at 1106 GMT in calm trades. It had closed at 181 naira on Tuesday.
Dealers told Reuters they were expecting the central bank to intervene again on Wednesday, as it has done since the devaluation, before taking positions — a more cautious approach to trading that they said showed demand for the dollar has slowed.
But they added that it was too early to tell whether the naira had found its level around the 183 mark, because if the central bank failed to meet demand at its twice-weekly auction on Wednesday and did not intervene, then the naira could continue to weaken.
Reuters
