Trump victory ‘is good for the naira’

Donald Trump victory is good for the naira, and many other currencies around the world, the markets have shown.

A Trump victory is seeing a plunge in the US dollar, and a record fall in the Mexican Peso, which has lost over 12 percent in the past 24 hours.

The US dollar has fallen by over three percent to the Japanese yen, while the Mexican Peso is ploughing fresh record lows against the US dollar and the euro, with fears that a Trump presidency will hurt the Mexican economy hard, the UK Guardian is reporting.

The greenback fell as much as 3.8 percent against the yen, the biggest intraday decline since the Brexit referendum, 2.4 percent against the euro and 2.3 percent against the Swiss franc.

For the Nigerian naira, a drop in the dollar may not necessarily yield a strengthening of the currency against other currencies, but the naira will be stronger, relative to the dollar.

According to Lukman Otunuga, market analyst at FXTM, “a Clinton victory may indirectly impact Nigeria via a resurgent Dollar and heightened US rate hike expectations for December”.

“Markets still remain supportive of a Clinton victory though, but as said, this will punish the naira and Nigeria even further.

“We have a situation where both candidates could represent a negative impact to the global economy. A Trump victory may also impact Nigeria via uncertainty and risk aversion which will punish emerging markets”.

Jameel Ahmad, chief market strategist at FXTM, had earlier said a Trump victory will be good for the British pound, which may rebound from being the worst major currency of 2016.

Ahmade goes on to say “Donald Trump becoming the President of the United States could result in growth forecasts being downgraded at least in the short term due to investor uncertainty, which will in theory weaken demand for commodities like oil and weigh on the valuation of oil”.

In the long run, this may be bad for the Nigerian economy, with oil prices expected to fall again.