Naira steady after CBN devalues currency

The Nigerian naira on Tuesday firmed against the United States dollar at the inter-bank market after the Central Bank of Nigeria finally endorsed the devaluation of the naira against the dollar.The unit steadied at N158.99 to the greenback early on Tuesday, the same level it was at before the CBNs announcement on Monday, after opening lower at N159.50.Reuters quoted a dealer as saying, There was an initial pressure on the naira, which has moderated. The market had already priced in the move, after the bank earlier on Monday auctioned $250m at N155.21 to the greenback.In a related development, the yields on three-year bonds fell after the announcement by the apex bank to lower its target trading band for the currency and keep benchmark interest rates on hold.The CBN moved the band it wants the local naira currency to trade between N150 and N160 to the dollar, compared to the previous figures of N145 to N155, due to prolonged naira weakness and high dollar demand.By moving the band on which the naira trades at its auctions to N150 and N160 to the dollar, the CBN wants to converge the official foreign exchange rates with the inter-bank and narrow arbitrage opportunities.According to polls conducted by Reuters, analysts had expected the apex bank to hike rates by 25 basis points to 12.25 per cent, prompting bond holders to go short on the three-year paper.Yields on three-year bonds, Nigerias most liquid paper, fell 100 basis points on buying pressure from investors that went short on the paper in anticipation of a rate hike.The three-year papers, all nearing maturity, traded at 15.1 per cent from Mondays close of 16.5 per cent. The five year and 20-year papers were not trading.The CBN on Monday said it would hold rates to allow the impact of an aggressive 275 basis point hike it made in October to take effect, meaning that the slowdown on tightening could be temporary.
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