Global Currency Watch: US Dollar Rebound Spoils Pound Sterling Rally As Naira Weakens 486 To One Dollar


LONDON – The British pound resumed its role as a risk-based currency on Friday and was on course for its biggest daily drop since June against the dollar, as global market sentiment deteriorated after the latest standoff between Washington and Beijing.

Meanwhile, the exchange rate between the naira and the US dollar as of Friday, August 7, 2020 was US $ 486/1 in the parallel market. The exchange rate closed at US $ 486/1 on Thursday August 6, 2020.

Global stocks fell and the US dollar rose after US President Donald Trump banned US trading with two popular Chinese apps: Tencent WeChat’s messaging app and ByteDance TikTok’s video-sharing app.

Ties between the world’s two largest economies have been strained for months, with the United States blaming China for the novel coronavirus outbreak and restricting freedoms in Hong Kong.

US employment data showed that job growth slowed significantly in July, but the dollar strengthened further, acting as a safe haven currency.

Cable fell as low as $ 1.3010 and was not far from $ 1.3053 by 3:30 p.m. GMT, down 0.7% since the New York close, having been on track for its more sharp daily decline since June.

After rebounding from the end of June, it was on track to end the week down 0.3%, compared to an increase of 2.3% last week and 1.8% the week before.

Against the euro, the pound was little changed at 90.36 pence to the euro.

The pound hit a five-month high on Thursday after the Bank of England took a less pessimistic tone about Britain’s coronavirus-hit economy.

Traders have also gained confidence that there are no signs that the BoE may introduce negative rates. The possibility of negative rates has been cited by analysts as a reason for sterling’s recent weakness.

The British pound is expected to lose some of its gains this year, according to a Reuters poll, amid fears over Brexit and COVID-19.

The range of 12-month forecasts was wide: $ 1.18 to $ 1.44.

“Over the next few weeks, we believe the market will focus more on the headlines surrounding the ongoing Brexit talks rather than monetary policy,” Morgan Stanley analysts wrote.

Britain’s transition period with the European Union is due to end on December 31, after which it will leave the single market and the customs union.

No post-Brexit trade deal has been reached, but UK Prime Minister overseeing Brexit talks Michael Gove has said there has been a change of tone on the part of the EU in recent weeks, allowing progress.

UK second quarter unemployment and GDP data is due next week. Rishi Sunak, Britain’s Finance Minister, said on Friday that the extension of the country’s holiday scheme, which is due to expire at the end of October, would leave some workers trapped in false hope that they could return to work after the pandemic.

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