The Ghanaian Cedi fell across the board against all its three major trading partner currencies on both the Bank of Ghana (BoG) inter-bank trading platform and on the Open Forex Market (oanda.com) as fears about the health of the global economy dampened appetite for riskier emerging market assets. The Cedi’s performance at the start of the week comes after the Monetary Policy Committee (MPC) of the BoG cut the policy rate from 17.0% to 16.0%, the lowest in more than 5 years. Commenting on the recent performance of the Cedi after the conclusion of the MPC meeting, the governor noted that “the global financial developments, in particular the strengthening of the US dollar and increased risk aversion, adversely impacted the currency markets in emerging market and frontier economies, including Ghana.”
The Cedi has largely been under intense pressure in the first month of the year as demand for forex by businesses and importers rose sharply. The supply of forex, particularly the US Dollar, by the central bank has however not been sufficient to meet the strong growing demand. This phenomenon has led to the Cedi’s recent depreciation. The Cedi is likely to remain under pressure in the near term following BoG data which revealed that the country’s current account outturn coupled with lower net capital inflows resulted in an overall balance of payments deficit of USD 671.5 million (1% of rebased GDP) for the year 2018 as against a surplus of USD 1.1 billion (1.9% of rebased GDP) in 2017. This trend culminated in the Gross International Reserves (GIR) declining from USD 7.6 billion (4.3 months of import cover) at the end of 2017 to USD 7.0 billion (3.7 months of import cover) in 2018.
On the BoG inter-bank trading platform, the Cedi built on previous week’s losses against the US Dollar and the British Pound Sterling. Against the Euro, it erased all gains recorded last week. The Cedi depreciated 0.67%, 3.06% and 1.24% to begin the week at GHC 4.9454, GHC 6.5185 and GHC 5.6530 from previous week’s trade values of GHC 4.9126, GHC 6.3250 and 5.5840 against the Dollar, the Pound and the Euro respectively. The Cedi recorded the lowest week-on-week depreciation in 2019 this week as investors focus shifted to the US Fed’s policy meeting next week when the Fed is expected to leave interest rates unchanged after raising them four times in 2018.
On the Open Forex Market (oanda.com), the Cedi erased all gains recorded against its three major trading partner currencies last week. It depreciated by 0.41%, 2.74% and 0.84%, week-on-week, to trade at GHC 4.9539, GHC 6.5267 and GHC 5.6577 at the start of the week from previous week’s trade values of GHC 4.9337, GHC 6.3519 and GHC 5.6106. The Pound gained traction as growing expectations that Britain may be able to avoid a no-deal or hard Brexit calmed investors’ nerves and boosted their appetite for the Pound. According to a Reuters report, the Pound has gained the most in the first month of 2019 among G10 currencies. The Pound also received a boost after strong employment data suggested UK’s labour market remained robust despite an anticipated economic slowdown ahead of Brexit.
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 4.9454 [January 28th, 2019] indicating a 2.41% 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 4.9539 [January 28th, 2019], representing a 1.56% year-to-date depreciation of the Cedi against the US Dollar.