After a near one month of recording week-on-week losses against its three major trading partner currencies on both the Bank of Ghana (BoG) inter-bank trading platform and on the Open Forex Market (oada.com), the Cedi began this week posting a mixed performance against the US Dollar, the British Pound Sterling and the Euro. The Cedi posted a marginal loss against the Dollar at the start of the week as compared to previous weeks’ performances. It built on previous weeks’ lows to extend its losing streak against the Dollar to nine weeks of consecutive losses on the BoG inter-bank trading platform. Against the Pound and the Euro, the Cedi reversed parts of its previous weeks’ losses recorded against the pair. The Cedi closed last week rising to a 7-day high against the Pound before erasing some of its recent gains to begin this week at a 4-day low. The Cedi’s mixed performance comes ahead of the announcement of the consumer price index for February later in the week, where it is expected that the recent performance of the local currency will exert an upward pressure on the inflation rate. The February inflation rate will guide the Monetary Policy Committee of the BoG in its policy rate announcement later in the month.
The Cedi’s mixed performance this week can be perceived as a market response to the recent announcement by the BoG to shore up Ghana’s reserves with USD 800.00 million. The central bank believes this buildup will assist in increasing the nation’s Net International Reserves in a bid to boost confidence in the system and assist in giving some respite to the Cedi. But many analysts have cautioned the viability of this interim measure in stabilizing the Cedi in the medium to long-term especially after a research report conducted by the BoG on the impact of external shocks to Ghana’s economy revealed that the recent depreciation of the Cedi against its major trading partner currencies is expected to continue throughout the year, as global events points to more external threats. The research paper titled ‘the effect of external conditions on the economy of Ghana’ indicated that “conditional forecast for a slowdown in China and the U.S, the two largest economies in the world, show that these shocks will dampen GDP growth in Ghana, induce a significant deterioration in the exchange rate and increase the domestic inflation rate.”
On the BoG inter-bank trading platform, the Cedi depreciated by 0.67% to begin the week at GHC 5.2378 from previous week’s trade value of GHC 5.2028. It however, posted 0.15% and 0.04% gains against the Pound and the Euro respectively. The Cedi traded at GHC 6.8547 and GHC 5.8874 at the start of the week from previous week’s trade values of GHC 6.8651 and GHC 5.8898 against the Pound and the Euro respectively. The Cedi posted its first weekly gain in three weeks against the Euro on the BoG inter-bank trading platform after the European Central Bank (ECB) offered fresh round of cheap loans to banks and pushed back any plan to hike the zone’s rates to 2020 from the anticipated second half of 2019. The ECB’s decision to tweak its guidance on rates according to a Reuters’ report came as a big surprise to many investors who in turn sold the single currency.
On the Open Forex Market (oanda.com), the Cedi repeated similar performance as recorded on the BoG inter-bank market. It fell against the Dollar but came in strong to post gains against the Pound and the Euro. It suffered a 0.51% loss against the Dollar to trade at GHC 5.5370 at the start of the week from previous week’s trade value of GHC 5.5088. It however gained 0.64% and 0.41% against the Pound and Euro to begin the week at GHC 7.2303 and GHC 6.2244 from GHC 7.2772 and GHC 6.2503 recorded last week. The Pound lost against a host of trading partner currencies including the Cedi after media reports revealed that Brexit negotiations had hit an impasse the previous week. With less than three weeks to go for the UK to leave the EU, officials of the two sides are at an impasse over a proposal which is aimed at ensuring a frictionless Irish border.
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 5.2378 [March 11th, 2019] indicating an 8.46% 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 5.5370 [March 11th, 2019], representing a 13.51% year-to-date depreciation of the Cedi against the US Dollar.