In a week clouded with major international events such as escalating trade tensions between the US and China, rising political tensions in Europe, unresolved Brexit negotiations, and geopolitical tensions, the Ghana Cedi fell against its three major trading partner currencies on the Open Forex Market (oanda.com). On the Bank of Ghana (BoG) inter-bank trading platform, the Cedi was mixed as it further built on previous weeks’ losses against the US Dollar, fell against the Euro but gained momentum to post its third consecutive gain against the British Pound Sterling. The Cedi’s performance at the start of the week comes after the Monetary Policy Committee of the BoG kept its key lending rate unchanged at 16% for the second consecutive time this year. According to the Governor of the BoG, the decision to hold the policy rate came on the back of the recent exchange rate pass-through which has slowed the disinflation process, leading to a slightly elevated inflation profile as indicated in recent forecasts.
The Cedi’s performance in the near to medium-term is expected to be influenced by Ghana’s rising debt stock which according to a release by the BoG surged from GHC 176 billion to GHC 198 billion. After adding a little over GHC 21 billion in just over four months to the debt stock, the debt-to-GDP currently stands at 57.5%. As the Cedi continues to depreciate marginally, it is expected that the external debt component of the debt stock which stood at GHC 105.2 billion, representing 30.5% of GDP, as at the close of March, 2019 will mount an upward pressure on the national debt. According to analysts, rising interest payments may increase investor nervousness and may further deter foreign investors away from the local economy at the expense of the Cedi.
On the BoG inter-bank trading platform, the Cedi depreciated by 0.23% and 0.42% against the Dollar and the Euro to start the week at GHC 5.1177 and GHC 5.7271 from previous week’s trade values of GHC 5.1061 and GHC 5.7029 respectively. Against the Pound, the Cedi maintained its resilience as it gained 0.17% to open the week at GHC 6.4877 from previous week’s trading figure of GHC 6.4990. The Cedi built on previous weeks’ gains against the Pound after UK Prime Minister, Theresa May, indicated that she was stepping down following her failure to secure a Brexit compromise with the opposition party. With May gone, investors fear that the UK is headed for a no-deal break from the European Union.
On the Open Forex Market (oanda.com), the Cedi lost 0.65%, 0.38%, and 0.97% to trade at GHC 5.2411, GHC 6.6569, and GHC 5.8694 at the start of the week from previous week’s trade figures of GHC 5.2075, GHC 6.6315, and GHC 5.8133 against the Dollar, the Pound, and the Euro respectively. The Cedi failed to capitalize on recent weaker US economic data and the threat of economic consequences from US-China trade war on the US economy to post a recovery from previous weeks’ lows. Fears of a US policy rate cut following evidence that economic activities seem to be slowing, weighed on the greenback as it retreated against major trading pairs.
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 5.1177 [May 27th, 2019] indicating a 5.98% 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 5.2411 [May 27th, 2019], representing a 7.44% year-to-date depreciation of the Cedi against the US Dollar.