Nigerian central bank to meet retail traders on naira rates – Reuters

By Oludare Mayowa

LAGOS Jan 9 (Reuters) – Nigeria’s central bank officials will meet bureau de change operators on Tuesday to try to find ways to eliminate the gap between the official and black market dollar rates, the association president told Reuters. 

The naira lost a third of its official value against the dollar in 2016 after the bank scrapped a peg in a bid to alleviate dollar shortages. On the black market, the naira is worth about 40 percent less than the official rate.

Finance Minister Kemi Adeosun said last month that the central bank would try to narrow the gap, which the government says is hurting an already shaky economy, but gave no details.

Aminu Gwadabe, president of the Bureau de Change association, said the body would meet central bank officials on Tuesday.

“We would like to find ways to resolve the issue of multiplicity of exchange rates and ensure stability in the market,” he said, adding that the aim was to boost liquidity and attract foreign investors.

The central bank often consults industry bodies including banking and currency associations before finalising policy.

In the past, retail operators accounted for less than 5 percent of total foreign currency trading in Nigeria. But with liquidity low on the official market, and the central bank the main supplier of dollars, the bureaux de change have done more business.

Low prices have dried up the oil income that makes up 70 percent of government revenues and pushed Africa’s largest economy into recession.

The naira has traded at around 305 to the dollar on the official interbank market since August, while it was quoted at 490 to the dollar on the black market on Monday. (Additional reporting and writing by Chijioke Ohuocha; Editing by Kevin Liffey)

 

Russia restores Japanese yen to forex reserves, cuts back on euro – Reuters

Russia’s central bank reinstated the Japanese yen in its international reserves in the second quarter of 2016, while cutting back on the share of euros, the bank said on Monday.

The central bank said it held 2.4 percent of its foreign currency reserves in yen as of June 30, 2016, after mentioning no holdings of the Japanese currency as of March 31 in its previous quarterly report.

Previously, the central bank, which discloses its foreign currency reserves structure with a lag of six months, had reported having less than 1 percent of its reserves stored in yen-denominated assets. 

The share of dollars in Russia’s currency reserves rose to 48.3 percent as of June 30, 2016, up from 47 percent as of late March 2016, the central bank’s data showed on Monday.

The share of euros in the reserves declined to 35.7 percent as of late June, down from 39.1 percent seen in late March, while the share of the British pound went down to 8.8 percent from 9.3 percent.

Canadian dollar assets accounted for 3.7 percent of Russian foreign-currency assets as of mid-2016, versus 3.5 percent three months before.

The share of the Australian dollar remained unchanged over the second quarter at 1.1 percent and the share of the Chinese yuan also stood unchanged at 0.1 percent.

Russia joined a small group of countries, most of them in Asia, which purchased the Chinese currency for their reserves in late 2015 in an attempt to diversify its strategic holdings of foreign assets.

(Reporting by Anton Kolodyazhny; Writing by Andrey Ostroukh; Editing by Christian Lowe)

China December forex reserves fall for sixth month, near $3 trillion level – Reuters

By Fang Cheng and Sue-Lin Wong | BEIJING

China’s foreign exchange reserves fell to near six-year lows in December, but held just above the critical $3 trillion level (2.44 trillion pounds), as authorities stepped in to support the weakening yuan ahead of U.S. President-elect Donald Trump’s inauguration.

China’s reserves shrank by $41 billion in December, slightly less than feared but the sixth straight month of declines, data showed on Saturday, after a week in which Beijing moved aggressively to punish those betting against the currency and make it harder for money to get out of the country.

Analysts had forecast a drop of $51 billion.

 
 

For the year as a whole, China’s reserves fell nearly $320 billion to $3.011 trillion, on top of a record drop of $513 billion in 2015.

While the $3 trillion mark is not seen as a firm “line in the sand” for Beijing, concerns are swirling in global financial markets over the speed with which the country is depleting its ammunition to defend the currency and staunch capital outflows.

Some analysts estimate it needs to retain a minimum of $2.6 trillion to $2.8 trillion under the International Monetary Fund’s (IMF’s) adequacy measures.

If pressure on the yuan persists, analysts suspect China will continue to tighten the screws on outflows via administrative and regulatory means, while pouncing sporadically on short sellers in forex markets to discourage them from building up excessive bets against the currency.

But if it continues to burn through reserves at a rapid rate, some strategists believe China’s leaders may have little choice but to sanction another big “one-off” devaluation like that in 2015, which would likely roil global financial markets and stoke tensions with the new Trump administration.

The yuan depreciated 6.6 percent against the surging dollar in 2016, its biggest one-year loss since 1994, and is expected to weaken further this year if the dollar’s rally has legs.

Adding to the pressure, Trump has vowed to label China a currency manipulator on his first day in office, and has threatened to slap huge tariffs on imports of Chinese goods.

That has left Chinese eager to get money out of the country, creating what some researchers describe as a potentially destructive negative feedback loop, where fears of further yuan falls spur outflows that pile fresh pressure on the currency.

“For 2016 as a whole we estimate total capital outflows to have been around $710 billion,” Capital Economics’ China economist Chang Liu told Reuters in an email.

Capital Economics estimated net outflows in November and December alone were $76 billion and $66 billion, respectively.

The main reason China’s forex reserves fell in 2016 was because the central bank used them to stabilise the yuan, the country’s foreign exchange regulator said in a statement after the data.

With the dollar gaining ground, a decline in the value of other currencies held by China also contributed to the decline, the State Administration of Foreign Exchange (SAFE) said.

“Forex reserves are likely to fall again in January,” China’s SWS MU Fund Management said in a note, predicting the U.S. economy and the dollar would continue to strengthen.

CLAMPDOWN ON OUTFLOWS TIGHTENS

China has stepped up efforts in recent weeks to shore up the yuan and curb capital outflows, sparking speculation it wants a firm grip on the currency ahead of Trump’s inauguration on Jan. 20 and the long Lunar New Year holidays at the end of the month.

State banks have bought yuan and sold dollars and regulators have tightened restrictions on individuals and companies who want to move funds out of the country, while denying they are imposing fresh capital controls.

This week the central bank also set higher daily guidance rates for the yuan, hiking it the most in a decade on Friday, and Beijing was suspected of pushing up yuan borrowing costs in Hong Kong to discourage offshore investors from making bearish bets on the currency. [CNY/]

SAFE said in late December that net cross-border capital outflows were expected to narrow in the fourth quarter in 2016, while the People’s Bank of China (PBOC) said last week that it would push reforms of the yuan regime, while keeping the currency basically stable in 2017.

The PBOC also raised reporting requirements for overseas transfers last Friday. The reporting threshold for cash and overseas transfers was cut to just 50,000 yuan ($7,230) from 200,000 yuan.

Regulators recently said they would step up monitoring of individual foreign exchange purchases to close loopholes, but the $50,000 yearly quota would not change.

While the yuan has soared this week as China bears down on the market, a Reuters poll showed it is expected to slide at least 4 percent this year, largely as expectations of interest rate hikes in the United States drive the dollar higher.

(Reporting by Cheng Fang and Sue-Lin Wong; Editing by Kim Coghill)

Sterling slides after PM May reignites ‘hard Brexit’ fears – Reuters

By Jemima Kelly | LONDON

Sterling was on track for its biggest daily losses in three months on Monday, sliding around 1 percent to a 10-week low to the dollar after Prime Minister Theresa May said she was not interested in Britain keeping “bits” of its EU membership.

In her first televised interview of the year on Sunday, May denied Britain would face a “binary choice” between curbing immigration and having preferential access to the bloc’s single market when it leaves the European Union.

May re-asserted that line on Monday, saying it was wrong for investors to interpret her comments as pointing to a “hard Brexit” – in which border controls are prioritised over market access – when asked about sterling’s falls on the back of her weekend interview.

 

The prime minister added that she rejected the idea of a “hard” versus a “soft” Brexit, that the government was seeking “the best possible deal” in terms of access to the single market, and that she had said nothing new on Sunday.

Investors, though, took no comfort.

By 1650, sterling was trading at $1.2166 GBP=D4, down 1 percent on the day and close to a 10-week low of $1.2125 touched earlier. That put it on track for its worst day since Oct. 11.

“The market just takes the most negative view – it assumes that because May is keeping her cards as close as possible to her chest, there is no plan for Brexit and that we’re going to ‘hard Brexit’ out of the EU,” said BMO Capital Markets currency strategist Stephen Gallo.

Another risk was also playing into sterling’s weakness, strategists said – that of Scotland calling another referendum on independence.

“Scotland’s First Minister Sturgeon said that she is not ‘bluffing’ regarding the prospect of another independence referendum if Scotland is ‘driven off a hard Brexit cliff’, something that may have also fuelled the sterling tumble,” said IronFX currency strategist Charalambos Pissouros.

Against the euro, sterling tumbled 1.3 percent to an eight-week low of 86.95 pence EURGBP=D4.

“May saying that it’s not about keeping ‘bits’ of the EU suggests it’s not going to be about keeping access to the single market,” said HSBC currency strategist Dominic Bunning.

“She said we will have full control of our borders, and given what the other side of the debate – the EU – has said, that’s not compatible with full access to the single market, free movement of capital, free movement of goods and services. That’s the direct trade-off that the FX market is looking at.”

May also used Sunday’s interview to dismiss criticism from Britain’s former EU ambassador Ivan Rogers that her government’s thinking on Brexit was “muddled”, but she ignored growing calls from business leaders, lawmakers and the parliamentary opposition to provide more details of her exit strategy.

Sterling has fallen 19 percent against the dollar since Britons voted to leave the EU on June 23 and around 12 percent against the euro, which has itself been vulnerable to political uncertainty.

(Editing by Gareth Jones and John Stonestreet)

Oil slumps on supply worry, sterling hurt by May comments – Reuters

By Gertrude Chavez-Dreyfuss | NEW YORK

Oil prices fell on Monday on signs growing U.S. output could undermine plans by other producers to cut supply, while sterling slumped following comments by British Prime Minister Theresa May alluding to an aggressive exit from the European Union.

Sterling was the big mover on currency markets, falling 1 percent against the dollar and the euro to more than two-month lows after the remarks by May, who said she was willing to sacrifice the country’s single-market membership for more control over its borders.

U.S. Treasury yields retreated in line with British bond yields after May’s comments. 

Meanwhile, the drop in oil prices weighed on energy stocks on Wall Street as the Dow Jones Industrial Average moved further from hitting the historic and widely awaited 20,000 mark.

“We see the optimism surrounding OPEC and non-OPEC production cuts being counterbalanced by fears of higher U.S. crude production as the higher rig count of last Friday still weighs,” said Hans van Cleef, senior energy economist at ABN Amro.

In late morning trading, Brent crude LCOc1 was last down $1.46, or 2.56 percent, at $55.64 a barrel. U.S. crude CLc1 was last down $1.39, or 2.57 percent, at $52.6 per barrel.

In the U.S. equity market, the Dow Jones industrial average .DJI fell 42.63 points, or 0.21 percent, to 19,921.17, while the S&P 500 .SPX was down 4.01 points, or 0.17 percent, at 2,272.97.

A gain in technology stocks lifted the Nasdaq Composite .IXIC by 7.39 points, or 0.13 percent, to 5,528.44.

“The market is building drama around 20,000 and if and when we get promising earnings reports, the Dow will go through the point like a hot knife through butter,” said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.”

U.S. government bond prices rose, with the 10-year note US10YT=RR up 8/32 in price to yield 2.386 percent, compared with 2.418 percent late on Friday.

In line with U.S. Treasuries, German 10-year yields DE10YT=TWEB, the benchmark for euro zone borrowing costs, fell and last stood at 0.28 percent.

Analysts said a soft dollar weighed on U.S. Treasuries yields as well. The dollar slid against the safe-haven yen as risk appetite declined, while sterling sank to more than two-month lows after May’s remarks.

“Anything that suggests a hard Brexit is more likely … is very damaging to UK growth prospects,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp in New York.

The dollar index .DXY, which tracks the greenback versus a basket of six currencies, fell 0.16 points or 0.16 percent, to 102.06. The greenback also fell 0.4 percent against the yen to 116.40 JPY=.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1.1 points or 0.25 percent, to 438.77. Australia’s S&P/ASX200 rose 0.9 percent while Hong Kong shares .HSI rose 0.2 percent. Trading was light because Japan was shut for a holiday. The MSCI world equity index .MIWD00000PUS, which tracks shares in 45 nations, fell 0.88 points or 0.2 percent, to 428.8.

A focus for the week will be a news conference on Wednesday at which U.S. President-elect Donald Trump may give more details about the policies he will seek to implement after he takes office on Jan. 20.

Expectations of more economic stimulus from a Trump administration have helped to boost U.S. stocks and bond yields.

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Nigel Stephenson, Karolin Schaps in LONDON, Yashaswini Swamynathan in Bengaluru, Sam Forgione and Richard Leong in New York; Editing by Bernadette Baum)

Dollar falls against yen on risk reduction; sterling sinks – Reuters

By Sam Forgione | NEW YORK

The U.S. dollar slumped against the safe-haven yen on Monday on investors’ reduced appetite for risk, while sterling sank to more than two-month lows on talk that Britain would drastically rework trade ties with the European Union after Brexit.

A fall in U.S. Treasury yields and U.S. stocks drove the dollar down as much as 0.6 percent against the yen to a session low of 116.16 yen. The dollar remained within recent trading ranges and did not test Friday’s more than three-week low of 115.04 yen.

Analysts said there was no fundamental catalyst for the dollar’s decline against the yen, with traders probably reacting to lower U.S. yields and equities. 

“There’s an optical relationship with the fact that stocks are lower,” said Shahab Jalinoos, global head of FX strategy at Credit Suisse in New York.

The dollar was last down 0.4 percent at 116.43 yen. It dipped modestly against the euro and Swiss franc, leading the dollar index, which measures the greenback against a basket of six major currencies, to stand 0.08 percent lower at 102.150.

The pound slid more than 1 percent against both the dollar and the euro after weekend comments from British Prime Minister Theresa May that she was not interested in keeping “bits of membership” of the European Union.

Sterling slid as low as $1.2125, its weakest against the dollar since the end of October. It fell about 1.2 percent against the euro, hitting 86.91 pence per euro, the lowest since mid-November.

“Anything that suggests a hard Brexit is more likely … is very damaging to UK growth prospects,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp in New York.

Against the dollar, sterling was last down 1 percent at $1.2156, while the euro was up 0.3 percent at 1.0562. The dollar was down 0.17 percent against the franc at 1.0162 francs.

On Wall Street, the benchmark S&P 500 stock index was down 0.13 percent, while benchmark 10-year U.S. Treasury yields fell nearly four basis points on the day to 2.383 percent.

(Reporting by Sam Forgione; Additional reporting by Marc Jones in London; Editing by Lisa Von Ahn)

Venezuela increases minimum wage by 50% – NAN

Venezuela’s socialist President Nicolas Maduro announced on Sunday a 50 percent hike in the minimum wage and pensions, the fifth increase over the last year, to help shield workers from the world’s highest inflation rate.

The measure puts the minimum monthly salary at 40,683 bolivars – about $60 at the weakest exchange level under the state’s currency controls, or $12 at the black market rate.

“To start the year, I have decided to raise salaries and pensions,” he said on his weekly TV and radio program.

“In times of economic war and mafia attacks … we must protect employment and workers’ income,” added Maduro, who has now increased the minimum wage by a cumulative 322 percent since February 2016.

The 54-year-old successor to Hugo Chavez attributes Venezuela’s three-year recession, soaring prices and product shortages to a plunge in global oil prices since mid-2014 and an “economic war” by political foes and hostile businessmen.

But critics say his incompetence, and 17 years of failed socialist policies, are behind Venezuela’s economic mess.

They say the constant minimum wage hikes symbolize Maduro’s policy failures and fail to keep pace with real on-the-street price rises.

Venezuela’s inflation hit 181 percent in 2015, according to official data, though opponents say the true figure was higher. There is no official data for 2016, but most economists think inflation at least doubled from the previous year and will be worse again in 2017.

Venezuela’s opposition has said inflation was more than 500 percent in 2016, while the economy shrank 12 percent. The government has given no gross domestic product data for last year.(Reuters/NAN)

Naira appreciates amid dollar scarcity – Businessday

The nation’s currency on Monday appreciated in value against the US dollar, gaining N3.00k to close at N490/$ at the parallel market Monday. This represents a 0.61 percent gain. The naira closed at N493 per dollar last Friday.

Against other currencies, the naira closed at N580 against the Pounds Sterling, and N485 against the Euro also at the parallel market.

At the inter-bank foreign exchange market, the local currency stood at N305 per dollar as at 2.37 pm and the same since two weeks ago.

The naira is expected to ease this week following the accretion in foreign reserves by 4.88 percent to $26.22 billion as at January 5, 2017 from $25.0 billion in December 15, 2016.

Also, the expected dollar supply to Bureau De Changes (BDCs) by the International Money Transfer Operators (IMTOs) will also help shore up the naira.

HOPE MOSES-ASHIKE

FG Issues New Guideline For Collation Of Surplus Fund – Channels TV

The federal government has issued a new guideline for the computation of operating surpluses in order to reduce cases of under-remittance of funds by revenue-collection agencies.

The guideline was issued over the weekend through the Ministry of Finance.

Financial statements are expected to contain details of projected internally generated revenue, personnel and overhead costs derived from the national budget, so as to adequately prepare estimates of revenue and expenditure of agencies.

In 2016, 33 revenue generating agencies were indicted for not remitting a total of 450 billion Naira into the consolidated revenue fund account of government.

The Finance Minister, Kemi Adeosun, has therefore warned that a violation of the three-year template would attract severe sanctions.

Survey Shows PMI Rose Five-month High in December – Thisday

By Nume Ekeghe
 
The  Stanbic IBTC’s Purchasing Managers’ Index (PMI) has indicated that the index attained a five month high, which was a reflection of an improvement in the macroeconomy.
This emerged after the Central Bank of Nigeria (CBN) revealed that its Manufacturing PMI stood at 52 index points in December 2016, also indicating an expansion in the manufacturing sector during the review period. The central bank’s PMI index had recorded decline in the preceding eleven months.
 
Continuing, Stanbic IBTC explained that the headline figure was derived from its Purchasing Managers’ IndexTM (PMITM). Readings above 50.0 signalled an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
At 48.1 in December, up from November’s 47.7, the headline figure rose to a five-month high but remained below the crucial 50.0 no-change mark. It therefore signalled a further contraction of Nigeria’s private sector. Moreover, the latest figure lengthened the current downturn to eight successive months.
Commenting on December’s survey findings, Ayomide Mejabi, Economist at Stanbic IBTC Bank said: “The rate of contraction in Nigeria’s private sector slowed in December as a result of weaker declines in output and new export orders as well as a slower increase in output prices. The headline PMI rose to its best level in the last five months, perhaps indicating that underlying macro-economic bottlenecks are being resolved. Having said that, most other facets of activity continue to deteriorate as new business orders returned to contraction territory.
“In addition, after recording marginal growth in October, employment extended its recent decline from November into December. The price PMI sub-indices on the other hand show that underlying inflationary pressures may be subsiding, as while output prices continue to increase, they are doing so at a slower pace compared to earlier in the year. In summary, it is perhaps still too early to ascertain if a turnaround in Nigeria’s economic challenges is imminent as anecdotal evidence still suggests that many of the productive sectors continue to struggle with foreign exchange needed to boost domestic investment and consequently, growth.”
 
Furthermore, it stated that the main findings of the December survey were the weakening of Nigeria’s private sector stemmed from a slower decline in output, with panel members citing weaker underlying demand. Furthermore, business activity has decreased in every month since February.
The latest survey data signalled a return to contraction territory for new business following a marginal increase in November. The fall was broad-based, as new export orders also lowered. Inflationary pressures weighed on consumer demand, according to several survey respondents.  Meanwhile, firms continued to work through their outstanding business levels in December. Although the rate of deterioration eased to the slowest in four months, it remained strong in comparison to the three-year series average.
 
Job cuts in Nigeria’s private sector were evident for the second month in a row. In fact, the rate of job shedding was the fastest in the series history, despite being relatively moderate.  Nigerian businesses raised output prices again in December. The rate of inflation was marked despite slowing since the previous month. Moreover, output charges rose at a stronger pace than input prices. Nigerian private sector firms commented on exchange rate depreciation, rising delivery costs and higher foods prices as the main factors driving inflation.
 
For the fifth time in as many months, input buying in the private sector of Nigeria decreased. The rate of decline was little-changed from November, with firms linking the fall to a lack of working capital. That said, pre-production inventories accumulated at a fractional rate in December.
Finally, suppliers’ lead times shortened in Nigeria’s private sector during the month. However, the rate at which vendor performance improved was only slight.