Despite the naira’s continued fall, certain emerging market’s (EM) currencies have outperformed the US dollar in recent times, even as global concerns have risen.
For nearly 49 years, the Nigerian currency has been steadily declining. Although Naira’s freefall of last year appears to have ended, a look back in time reveals that we should be cautious.
Since 1973, the Nigerian currency has declined by 10.6% per year, according to data assessed by the International Monetary Fund. This was shown in the study “Nigeria: Selected Issues Paper.”
However, it seems like the trend isn’t going away the Naira fell by N23 in the first quarter of 2022. Nonetheless, other emerging economies have gained against tough odds gained massively against the Naira.
South African rand
- The South African rand strengthened to its strongest level in five months as rate rise prospects intensified. The USD/ZAR pair is currently trading at 14.39, which is more than 7% lower than its peak this month. The same pattern was observed in other currency pairs such as EUR/ZAR and GBP/ZAR.
- At the time of writing, the USD/ZAR pair had fallen by more than 8.14 percent, making it one of the world’s top currencies. The hawkish South African Reserve Bank (SARB), which has gotten more hawkish, has aided this performance.
- At the same time, the country’s economy has profited from increased demand for its major commodities, such as gold, platinum, and palladium.
- The USD/ZAR pair has plummeted below the 50% Fibonacci retracement level as well as the 25-day and 50-day moving averages. As a result, the pair is likely to continue sliding in the coming days.
Brazilian real
- The Brazilian real has likewise been steadily rising in recent months. At the time of writing, the USD/BRL pair had fallen to a low of 4.6570, its lowest level since March 16th, 2020.
- It has decreased by approximately 20% since its peak in 2021. As a result, the real is one of the top EM currencies. Year to date (YTD), the Brazilian real increased by 16.25 percent against the US dollar.
- The real has benefited from the central bank’s extremely hawkish stance, which has raised interest rates many times in an effort to combat inflation.
- At the same time, like South Africa, the country has benefited from the ongoing commodity prices. Brazil’s top commodities like soybeans, iron ore, oil, and sugar have all risen sharply as the crisis in Ukraine has continued.
- The USD/BRL pair formed a triple-top pattern on the weekly chart. It also managed to move below the important support level at 4.89, which was the lowest level on June 2021. Therefore, there is a likelihood that it will keep falling in the near term.
Russian ruble
- Despite the ongoing Ukrainian turmoil, the Russian ruble is another emerging market currency to consider buying. The USD/RUB has fallen to 84, which is around 30% below its all-time high.
- At the time of writing, the Russian ruble was trading at 85 rubles per dollar, representing a 22.35% gain against the US dollar.
- This performance has occurred as a result of the Russian government’s and the central bank’s actions.
- In reaction to the escalating number of sanctions, the Russian government has declared that it will only accept rubles in exchange for gas and other supplies.
- In addition, the central bank has hiked interest rates and implemented measures to discourage capital outflows. As a result, there is a chance that the USD/RUB will continue to decrease.
