The Ghanaian Cedi slumped to record lows against its three major trading partner currencies as it extended its losing streak this week on both the Bank of Ghana (BoG) inter-bank trading platform and on the Open Forex Market (oanda.com). The Cedi fell to an all-time low against the US Dollar, the British Pound Sterling, and the Euro at the start of the week on both trading platforms. According to a Bloomberg report, the Cedi’s recent weakness is the worst among more than 140 currencies tracked by the foreign news network. The report further indicated that “out of the GHC 2.1 billion (USD 391 million) of two-year and longer-dated maturities sold by the government through January 31st this year, foreign investors bought just 6.3%, according to data from the Central Securities Depository Ghana Ltd compared with more than 30% in 2018”. Declining inflows from offshore investors demand for local bonds following a 100 basis points reduction in the monetary policy rate coupled with maturities not being rolled over is expected to weigh on the Cedi in the near-term.
The Ghanaian central bank in a bid to closely monitor and regulate forex trading activities has issued the ‘Ghana interbank forex market conduct’ directive to among other things clearly regulate the conduct of inter-bank foreign exchange business in the Ghanaian financial market. The objective is also aimed at establishing standards of practice expected of market participants to help ensure an efficient and effective forex market. The directive will prescribe rules for good ethical practices, fairness, integrity and also market rules for licensing a member of the inter-bank foreign exchange market. This, many believe is geared towards limiting the activities of black market operators and currency manipulation activities.
On the BoG inter-bank trading platform, the Cedi depreciated by 0.62%, 1.82% and 0.93%, week-on-week, to begin the week at GHC 5.0352, GHC 6.5876, and GHC 5.7179 from previous week’s trade values of GHC 5.0042, GHC 6.4699, and GHC 5.6654 against the US Dollar, the British Pound Sterling and the Euro respectively. The greenback posted its eighth consecutive weekly gain this week against the Cedi after minutes of a US Fed meeting was interpreted by investors as more hawkish than expected. The minutes of the latest Fed meeting stated that the US economy and its labour market remained strong in contrast to reports of a slowdown in world economic growth. This prompted expectations of at least a rate hike this year as investors bought the Dollar.
On the Open Forex Market (oanda.com), the Cedi built on previous weeks’ losses against all three set of trading partner currencies. It weakened by 2.02%, 3.29%, and 2.36% to trade at GHC 5.3548, GHC 7.0046, and GHC 6.0789 at the start of the week from previous week’s trade values of GHC 5.2486, GHC 6.7816 and GHC 5.9385 against the Dollar, the Pound and the Euro respectively. The Cedi-Pound pair broke through the GHC 7.0000 mark on the Open Forex Market as worries that Britain could crash out of the European Union without a trade deal diminishes. Reports that UK Prime Minister, Theresa May, was considering delaying the March 29th deadline for Britain’s exit from the bloc calmed investors nerves as it gave hopes of an orderly Brexit.
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 5.0352 [February 25th, 2019] indicating a 4.27% 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 5.3578 [February 25th, 2019], representing a 9.77 % year-to-date depreciation of the Cedi against the US Dollar.