Small Exchange: Nigeria’s FX window, India’s forex import coverage and China’s reserves peak
This week's currency news rounded up.
New report updates performance of Nigeria's new FX window
A new report by George Etomi & Partners, posted on Lexology, has analysed the effectiveness of Nigeria's FX window, established earlier this year in April as a means of boosting liquidity in the foreign exchange market.
The report reveals that since its inception, the Investors Window has traded $3.8 billion to July 2017. The analysis also indicates the window has delivered increased market confidence, increased forex liquidity for banks, renewed investor participation in equities and overall economic improvements.
However, as with most financial policies, there have been constraints. The window has been accused of being less “open market” and as having a “crowding out” effect on small-to-medium Nigerian enterprises.
Concerns remain, despite India's high forex reserves
India's foreign exchange reserves have peaked at record high levels, however, considering the Federal Reserve's potential for a loosening of its quantitative easing strategy, these may not be enough to fund imports during a financial crisis, according to the Economic Times.
Barclays Capital chief India economist Siddhartha Sanyal says currently, import cover of reserves would cover around 10 months' imports, which is lower than before the financial crisis of 2008. If global commodity prices rise or India's economy revives and more imports are needed, this could pose a problem.
Foreign exchange reserves currently remain at $392.9 billion.
China's foreign reserves achieve six months of consecutive gains
The South China Morning Post reports the country's forex reserves rose US$24 billion in July to a nine-month high of US$3.08 trillion.
This was the first time in three years that reserves had experienced gains for six months straight. The rise was mostly attributed to higher values of non-US dollar portfolio assets. Analysts' revealed the central bank would maintain its taut grip on capital outflows.
Each week Small Exchange sums up currency news from around the globe and looks into how it impacts exchange rates and options.