The Ghana Cedi at the start of the week posted a mixed performance against its three major trading partner currencies on both the Bank of Ghana (BoG) inter-bank trading platform and the Open Forex Market (oanda.com) after the BoG indicated moves to further consolidate Ghana’s forex space. The BoG, last week, cautioned businesses, individuals and other institutions to desist from undertaking business transactions in foreign currencies. A release from the BoG noted that “the general public is hereby reminded that the Foreign Exchange Act, 2006 (Act 723) prohibits the pricing, advertising, and receipt or payment for goods and services in foreign currency in Ghana.” The BoG in recent times has issued a number of directives aimed at reducing the demand for other currencies at the expense of the Cedi in a bid to curb the overly demand for forex.
The Cedi this week recorded its fifth consecutive weakly loss against the US Dollar on the BoG inter-bank trading platform after posting an impressive recovery at the close of the first quarter. The Cedi’s performance this week comes at a time when the International Monetary Fund (IMF) has projected Ghana’s debt to GDP ratio to increase by 2.4% to reach 62% in 2019. This, according to the IMF in its Regional Economic Outlook report for sub-Saharan Africa comes on the back of increase in the foreign component of the national debt amid a mild depreciation of the Cedi. This phenomenon has a high potential of raising investor nervousness which can lead to a broad selloff of local assets held by foreign investors.
On the BoG inter-bank trading platform, the Cedi recorded losses against the US Dollar and the Euro as it depreciated by 0.10% and 0.39%, week-on-week, to trade at GHC 5.0967 and GHC 5.7234 at the start of the week from previous week’s trade values of GHC 5.0917 and GHC 5.7014 respectively. The greenback built on previous weeks’ gains against the Cedi despite escalating uncertainties surrounding US-China trade talk. Investors and currency traders have been cautious of taking huge Dollar positions as they awaited news on whether the US and China can salvage a deal to prevent more US tariff increases. Against the British Pound Sterling, the Cedi recovered parts of its previous week’s dip to post a gain of 0.39%, week-on-week. It began the week at GHC 6.6048 from previous week’s trade value of GHC 6.6661.
On the Open Forex Market (oanda.com), the Cedi appreciated by 0.24% and 1.13% against the Dollar and the Pound to trade at GHC 5.1575 and GHC 6.7018 from previous week’s trade figures of GHC 5.1701 and GHC 6.7781 respectively. The Cedi recorded its biggest gain in three weeks against the Pound despite news of a robust growth of Britain’s economy in the first quarter of the year. Data released by UK’s Office for National Statistics indicated that the UK grew by 0.5% in line with Bank of England expectations. However, doubts that Brexit negotiations between the government and the opposition Labour party will yield a feasible result weighed on the Pound. Against the Euro, the Cedi failed to post a comeback as it further depreciated by 0.11% to trade at GHC 5.7944 from previous week’s trading value of GHC 5.7879.
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 5.0967 [May 13th, 2019] indicating a 5.54% 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 5.1575 [May 13th, 2019], representing a 5.73% year-to-date depreciation of the Cedi against the US Dollar.