October 2023 Wrap Up

What were the key moments in the market this month?

China fuels Nigeria’s growth with big bucks

During the Belt and Road Initiative forum in Beijing, China’s President Xi Jinping pledged to invest more in Nigeria’s power and digital sectors. Contracts worth $2 billion were signed between Nigeria’s National Agency for Science and Engineering Infrastructure (NASENI) and Chinese partners, with an additional $4 billion in letters of intent received for various projects like solar products, vehicle assembly, and clean energy. China also promised to provide financial support to finish two railway projects that had been delayed due to a reduction in China’s funding commitment. Overall, it’s a boost for Nigeria’s economy and a sign of stronger ties between the two countries.

Analysts predict a ‘Peso’-tive turn for Argentina

Argentina’s ruling Peronist party, led by Economy Minister Sergio Massa, surprised markets with a win in the general election, calming fears about libertarian candidate Javier Milei’s potential victory. Massa’s unexpected 36.5% of the vote, compared to Milei’s 30%, sets the stage for a closely contested run-off vote on November 19. Analysts suggest Massa’s win might prevent a sudden peso devaluation and delay the country’s shift to the dollar. Still, concerns persist due to Argentina’s economic challenges, including high inflation and mounting debts. Despite the victory, uncertainties about future policies keep investors cautious.

Yen in a spin after crossing 150 per dollar

The Japanese yen briefly slipped below 150 against the dollar, highlighting its status as the weakest major currency this year due to the substantial yield gap between Japan and the US. Dollar selling and concerns about algorithmic trades triggered this drop. Traders, cautious about further weakening, are on edge, fearing potential intervention by Japanese authorities. The wide interest rate disparity and the impending BoJ meeting intensify market uncertainties. Amidst widespread speculation, Japanese officials have yet to confirm interventions, and the IMF sees no compelling reason for Japan to step in and strengthen the yen in the foreign exchange market.

India’s Central Bank $5Bn swap comes to an end

The maturity of the Reserve Bank of India’s $5 billion swap on October 23 led to increased demand for US dollars and a drop in the overnight swap rate. Initiated in in April 2022, to provide banks with dollar liquidity, the swap’s withdrawal meant banks had to return borrowed dollars, leading to a decline in the swap rate. This indicated a strong demand for dollars, with banks willing to lend rupees at lower rates to obtain them. While the shortage might be short-term, further global dollar scarcity could prompt RBI interventions.

“If the global dollar shortage worsens and geopolitical risks accentuate, there may be (RBI) intervention through sell-buy swaps to manage dollar liquidity in the market,” said Ritesh Bhusari, joint general manager for treasury at South Indian Bank.