After weeks of sustained depreciation of the local currency against its major trading partner currencies, the Cedi steadied at the start of the week showing tentative signs of recovery on both the Bank of Ghana (BoG) inter-bank trading platform and on the Open Forex Market (oanda.com). The Ghanaian Cedi in the first three months of the year had remained under intense pressure touching several all-time lows against the US Dollar, the British Pound Sterling and the Euro on both trading platforms. The local currency, however, gained momentum rallying to more than near 3 weeks high against its three major trading partner currencies on account of several inflows which will strengthen Ghana’s international reserves.
The Cedi’s recent fall which was described as the worst performing currency among 140 currencies tracked international news network, Bloomberg, came on the back of a number of factors which led to portfolio outflow. One of such is investor nervousness following Ghana’s exit from the International Monetary Fund’s (IMF) Extended Credit Facility (ECF) programme which was aimed at ensuring fiscal discipline. The central bank’s sudden cut of the policy rate from 17.0% to 16.0% in January also raised a number of concerns among offshore investors who did not anticipate such a move. The Cedi, however, posted some gains against all three major trading partner currencies for the very first time this year after the Government of Ghana successfully completed its planned USD 3.00 billion Eurobond sale with maturities in 7, 12 and 31 years. According to the finance ministry, the order books exceeded USD 21.00 billion bids, the highest ever by a sub-Saharan African country. The huge demand for the Eurobond, according to the analyst gives an indication of a strong investor confidence in the economy. Ghana’s international reserves is also expected to be boosted with proceeds of COCOBOD’s 3-year receivables-backed trade finance facility of USD 300.00 million as well as USD 185.20 million from the final tranche of IMF’s ECF.
On the BoG inter-bank trading platform, the Cedi appreciated by 3.04%, 2.82% and 3.07%, week-on-week, to begin the week at GHC 5.0830, GHC 6.7258 and GHC 5.7589 from previous week’s trading values of GHC 5.2426, GHC 6.9213 and GHC 5.9410 against the Dollar, the Pound and the Euro respectively. The Cedi gained against the Dollar as investors sold the greenback as anxiety about a possible economic downturn following the inversion of Treasury US yield curve. The spread between US 3-month Treasury bills and 10-year bonds yields inverted for the first time in more than 10 years. According to reports, a yield curve inversion has widely preceded every US recession in the past 50 years.
On the Open Forex Market (oanda.com), the Cedi recorded substantial gains, appreciating 6.77%, 7.23% and 7.00% to trade at GHC 5.1113, GHC 6.7448 and GHC 5.7814 at the start of the week from previous week’s trade values of GHC 5.4824, GHC 7.2702 and GHC 6.2166 against the Dollar, the Pound and the Euro respectively. The Cedi’s gain against the Pound this week was the highest gain among the three set of major trading partner currencies after investors sold the Pound on fears that Britain would crash out of the European Union less than 1 week to the deadline for Brexit without a trade deal. British prime minister’s request to delay the process until end of June faced resistance from parts of the EU raising uncertainties.
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 5.0830 [March 25th, 2019] indicating a 5.26% 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 5.1113 [March 25th, 2019], representing a 4.78% year-to-date depreciation of the Cedi against the US Dollar.