Trump’s Presidency: Naira faces more headwinds as U.S. Dollar rallies strongly

The naira faces more headwinds as the safe-haven currency rallied strongly amid rising odds of Donald Trump’s return to the U.S. presidency.

The naira settled at N1,664.91/$ in the NAFEX market, while in the black market, the local currency lingered near the N1,730 support line.

Although the U.S. elections were still too close to call, the U.S. dollar strengthened against the British pound in London due to speculators betting on Republican Donald Trump as the winner.

• Trump got a head start over Kamala Harris, with both candidates backed by pro-Republican factions. Key battleground races in states, where elites were expected to secure victories, became increasingly decisive.
• Markets now expect Donald Trump to narrowly beat Kamala Harris in a tight U.S. presidential contest. As a result, the dollar reached its highest value since July.
• The dollar, which had fallen to a two-week low against a basket of currencies earlier in the day, surged to record its highest level since April 14, 2005. The triumph and aftermath of the U.S. presidential election heightened investor fears and quickly spread throughout markets.

Trump’s criticism of the Federal Reserve’s independence and his potential influence on its policies could affect U.S. interest rates. Lower U.S. rates might keep the dollar weaker than expected, which could ease pressure on the naira. However, if his policies lead to higher U.S. interest rates to combat inflation, this could strengthen the dollar and put the Nigerian currency at a disadvantage.

A president advocating for stronger trade tariffs or protectionist policies, such as those proposed by Donald Trump, could lead to a stronger dollar, further pressuring the naira. If the U.S. implements tariffs that affect global trade—particularly with countries like China—this could trigger an economic recalibration, potentially strengthening the dollar against other currencies, including the naira.

Trump’s approach to international relations, especially concerning conflicts or trade disputes, could either create or alleviate geopolitical tensions. Whether the global environment stabilizes or remains volatile will affect investor confidence in emerging markets, impacting the naira’s value.

Elevated appetite for risk amid higher odds of Trump’s Presidency

Bitcoin soared past $75K, reaching its highest-ever level, driven by the sentiment that former President Trump would ease cryptocurrency regulations if he won the election.

• U.S. markets are expected to react sharply to the election results, with investors adopting a cautious approach. U.S. stocks recorded their highest gains in six weeks during Tuesday’s trading session.
• Currency traders are also concerned about market uncertainty ahead of Thursday’s interest rate-setting decisions by the Federal Reserve and the Bank of England.
• The VIX index, which serves as Wall Street’s “fear gauge,” reached a high of 23.4 late last week before dropping to around 20.5. Tuesday’s robust equity market returns likely contributed to the drop in anticipated short-term volatility.

Price activity suggests that naira short-sellers are firmly in control of the N1,650 support line in the unofficial black market. Given the growing demand for foreign currency—primarily for travel, gasoline imports, and tuition payments abroad—additional selling pressure is expected.