Offshore investors’ participation in the government’s recently issued Treasury note and bond failed to prop up the value of the Ghana Cedi as the local currency began the year under intense pressure against its three major trading partner currencies. The Cedi began this week depreciating against the US Dollar, the British Pound Sterling and the Euro on both the Bank of Ghana (BoG) inter-bank trading platform and on the Open Forex Market (oanda.com). Despite improvement in the yields of the 2-year term note and the 3-year fixed rate bond, demand remained moderate. The two Treasury instruments were marketed to both resident and non-resident investors. The yield on the 2-year term note hardened by 25 basis points (bps) from 19.50% to 19.75%, while the yield on the 3-year fixed rate bond also strengthened by 50 bps from 19.50% to 20.00%.
The Cedi remained under pressure in the second half of the 2018 buoyed by an emerging market assets selloff following US policy rate hikes. The Cedi closed 2018 depreciating by 9.15%, 3.40% and 3.67% against the US Dollar, the British Pound Sterling and the Euro respectively on the BoG inter-bank trading platform. With global economic growth projected to weaken from a downward revision of 3.0% in 2018 to 2.9% in 2019 (according to a World Bank report), it is expected that the Cedi will be pressured to maintain stability as the government aims to close 2019 at a 4.2% budget deficit.
On the BoG inter-bank trading platform, the Cedi fell across the board against all three sets of trading partner currencies. It depreciated by 0.86%, 2.61%, and 1.83% to begin the week at GHC 4.8775, GHC 6.2676 and 5.5916 from previous week’s closing figures of GHC 4.8358, GHC 6.1081 and GHC 5.4909 against the Dollar, Pound and the Euro respectively. The Pound posted strong gains against the Cedi following reports of a hard or a no-deal Brexit being increasingly seem as unlikely. Investors are also optimistic of a delay to Britain’s end of March deadline for UK’s exit date from the EU or a second referendum that could end up cancelling Brexit. These positive developments boosted investors’ confidence as they bought the Pound.
On the Open Forex Market (oanda.com), the Cedi depreciated by 1.82%, 3.26% and 2.45% against the Dollar, the Pound and the Euro to begin the week at GHC 4.9436, GHC 6.3563 and GHC 5.6703 from previous week’s trade values of GHC 4.8552, GHC 6.1559 and GHC 5.5344 respectively. After the Cedi posted some brief gains against the greenback to end 2018, the Cedi gave up all its gains on the back of hawkish comments by the US Federal Reserve Chair. The Fed Chair, Jerome Powell, indicated that the US Fed intends to further shrink its balance sheet, suggesting it is not done the monetary policy rate hikes just yet.
According to the Bank of Ghana inter-bank rates, the Ghanaian Cedi began 2019 at GHC 4.8291 [January 2nd, 2019] against the US Dollar and is currently selling at GHC 4.8775 [January 14th , 2019] indicating a 1.00% year-to-date depreciation. Similarly, on the Open Forex Market (oanda.com), the Ghanaian Cedi traded at GHC 4.8780 [January 2nd, 2019] and is currently trading at GHC 4.9436 [January 14th, 2019], representing a 1.35% year-to-date depreciation of the Cedi against the US Dollar.