Dollar Hits 7-Day High as Naira Depreciates, External Reserves Shed $1.4 Billion
- The US dollar surged amid rising geopolitical tensions between the US and Iran
- Nigeria's naira weakened under global pressures, trading around ₦1,349.67 per dollar
- Declining external reserves raise concerns for Nigeria's economy and currency stability
Pascal Oparada is a journalist with Legit.ng, covering technology, energy, stocks, investment, and the economy for over a decade.
The United States dollar climbed to its highest level in seven days on Monday, driven by renewed geopolitical tensions between Washington and Tehran that unsettled global financial markets.
According to Reuters, investor sentiment turned cautious over the weekend after reports that the U.S. seized an Iranian cargo vessel, further escalating already fragile relations between the two nations.
Source: Getty Images
The development sparked a wave of risk aversion, prompting investors to shift capital into traditional safe-haven assets.
The dollar benefited from this flight to safety, even as broader currency markets showed mixed signals.
Analysts say the renewed tensions have also dampened optimism around potential diplomatic progress in the Middle East, adding another layer of uncertainty to the global economic outlook.
Mixed currency movements reflect cautious sentiment
Despite its initial rally, the dollar later gave up part of its gains as trading progressed, reflecting a divided market response to evolving geopolitical risks.
Commodity-linked currencies came under pressure, with the Australian dollar slipping by 0.3 per cent to $0.7145.
Meanwhile, the Japanese yen weakened to 158.96 per dollar, though it remained below the critical 160 mark that could trigger intervention by Japanese authorities.
These movements underscore a broader sense of caution among traders, who are balancing geopolitical developments with shifting expectations around monetary policy across major economies.
US–Iran standoff fuels volatility
At the heart of the dollar’s rally is the escalating standoff between the United States and Iran.
Washington confirmed the seizure of an Iranian vessel accused of attempting to bypass sanctions, a move that has further strained diplomatic ties.
Tehran has since issued warnings of possible retaliation and signalled it may withdraw from planned negotiations.
The breakdown comes just as a temporary ceasefire window nears expiration, raising fears of renewed instability in the region.
Market watchers say such geopolitical flashpoints often trigger volatility in global currencies, as investors seek safety amid uncertainty.
Naira faces pressure amid global and domestic factors
Nigeria’s foreign exchange market mirrored the global tension, with the naira showing signs of weakness across segments.
Data from the Central Bank of Nigeria (CBN) showed the currency closed at ₦1,342.5 per dollar on Friday, slightly weaker than ₦1,341.01 recorded the previous day.
By Monday, pressure intensified, with the naira trading around ₦1,349.67/$ after fluctuating between ₦1,353.00/$ and ₦1,341.00/$ during the session.
Analysts attributed the depreciation to increased demand for foreign exchange at the start of the week, coupled with declining market turnover.
According to a report by MarketForces Africa, interbank FX turnover dropped sharply to ₦18.773 million from ₦124.34 million recorded on Friday, signalling reduced liquidity despite ongoing interventions by the apex bank.
Decline in external reserves raises concerns
Nigeria’s external reserves also came under pressure, falling to approximately $48.62 billion. This marks a continued decline from recent levels and represents a $1.4 billion drop from the country’s previous peak of $50 billion.
The downward trend has been linked to fluctuations in global oil prices and sustained demand for foreign exchange.
Analysts warn that if current patterns persist, reserves could face further depletion in the coming weeks.
Despite these concerns, the CBN has maintained a relatively optimistic outlook, projecting stability in reserves over the medium term.
Divergence between official and parallel markets
While the naira showed modest stability at the official Nigerian Foreign Exchange Market (NFEM) last week, gaining nearly 1 per cent week-on-week, the parallel market told a different story.
The currency weakened by 0.71 per cent in the informal segment, closing at around ₦1,400 per dollar.
Source: Getty Images
This divergence highlights ongoing demand pressures, speculative activity, and structural inefficiencies that continue to shape Nigeria’s FX landscape.
Overall, the naira remains vulnerable to both external shocks and domestic dynamics, with global tensions and reserve fluctuations likely to dictate its near-term trajectory.
Naira rallies to its strongest level in weeks
Legit.ng earlier reported that the Nigerian naira has appreciated against the United States dollar in the official foreign exchange market, reaching N1,355.25/$ on Friday, April 10.
Data published by the CBN showed that Friday’s closing rate, which is its strongest level in recent sessions, represents an improvement from the pre-Easter rate of N1,382.75/$ recorded on Thursday, April 2, 2026.
The foreign exchange markets were open for four days and started the week on Tuesday at a closing rate of N1,389/$, before appreciating to N1,369/$ on Wednesday.
Source: Legit.ng
