As fears of an escalating trade war between the world’s two biggest economies prompted selling in emerging market currencies, the Ghanaian Cedi this week fell against its three major trading partner currencies on both the Bank of Ghana (BoG) inter-bank trading platform and on the Open Forex Market. The Ghana Cedi has remained under intense pressure against the US Dollar, posting its eighth consecutive week-on-week loss on the BoG inter-bank trading platform. The strong pick-up in forex demand comes on the back of increased demand by corporate bodies for dividend payments to offshore investors. Tightening external financial conditions coupled with maturities of bonds held by offshore investors have also contributed to the strong surge in forex demand.
It is however expected that with improved hard data, the BoG will regularly intervene in the currency market to auction forex to meet growing demand. According to data released by the BoG, Ghana recorded a trade surplus of USD 794 million in the first quarter of the year which culminated into a current account surplus of USD 294.5 million. These positive developments improved Ghana’s Gross International Reserves (GIR) to USD 9.9 billion (representing 5.1 months of import cover) at the close of the first quarter of the year.
On the BoG inter-bank trading platform, the Cedi registered weekly losses of 1.68%, 1.30%, and 1.80% against the US Dollar, the British Pound Sterling, and the Euro respectively. The Cedi traded at GHC 5.2035, GHC 6.5720, and GHC 5.8304 at the start of the week from previous week’s trade values of GHC 5.1177, GHC 6.4877, and GHC 5.7271 against the Dollar, the Pound, and the Euro respectively. The Cedi lost against the Dollar as trade stand-off between the US and China spurred investors to buy the greenback as well as other perceived safe-haven currencies.
On the Open Forex Market (oanda.com), the Cedi posted its worst weekly decline in more than two months. It depreciated by 2.75%, 2.32% and 2.79% to begin the week at GHC 5.3853, GHC 6.8115, and GHC 6.0332 from previous week’s trade values of GHC 5.2411, GHC 6.6569, and GHC 5.8694 against the Dollar, the Pound and the Euro respectively. The Cedi failed to capitalize on the Pound’s recent weakness to reverse earlier losses posted on the open forex market. The Pound fell against most trading pairs amid weak UK data and growing fears of a disruptive Brexit which weighed on the currency. Concerns that Britain is likely to crush out of the European Union without a trade deal as Prime Minister Theresa May is scheduled to effectively resign on June 7th and be replaced by a more Euro-sceptic leader, has led to a broad selling of the Pound.
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 5.2035 [June 3rd, 2019] indicating a 7.75% 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 5.3853 [June 3rd, 2019], representing a 10.40% year-to-date depreciation of the Cedi against the US Dollar.