The Cedi this week extended its losing streak against its three major trading partner currencies on both the Bank of Ghana (BoG) inter-bank trading platform and on the Open Forex Market (oanda.com). It fell to an all-time low against the Dollar and the Pound on both trading platforms at the start of the week as demand pressures coupled with eroding investor confidence over the government’s fiscal challenges weighed on the local currency.
Ahead of next year’s general elections, portfolio investors are worried that the plan outlined in the 2020 budget will not be met as revenue continues to underperform. According to a Bloomberg report, Ghana’s budget deficit is forecast to widen to 4.9% of Gross Domestic Product in 2019 from 4.1% in 2018. As government increases spending to pay for the financial sector bailouts and liabilities in the energy sectors, offshore investors remain cautious of threats to the fiscal consolidation process. Recent data at Ghana’s Central Securities Depository indicates that foreign investors holding of Ghanaian debt securities fell to GHC 27.65 billion as the close of October, 2019 from GHC 28.26 billion over the same period last year.
On the BoG inter-bank trading platform, the Cedi lost momentum as it built on previous week’s losses against the Dollar, the Pound, and the Euro. It fell by 0.21%, 1.89%, and 0.15% to trade at GHC 5.5397, GHC 7.2863, and GHC 6.1338 from previous week’s trade figures of GHC 5.5282, GHC 7.1512, and GHC 6.1247 against the Dollar, the Pound, and the Euro respectively. The Cedi failed to post a recovery against the Pound this week on growing optimism that the ruling Conservative Party would win with a majority in December 12th elections. Investors believe that a Conservative win would lift some of the political uncertainty that has weighed on the Pound in recent times.
On the Open Forex Market (oanda.com), the Cedi depreciated by 1.02%, 2.80%, and 1.23% to begin the week trading at GHC 5.6917, GHC 7.4867, and GHC 6.2977 from previous week’s trading values of GHC 5.6343, GHC 7.2826, and GHC 6.2211 against the Dollar, the Pound, and the Euro respectively. The greenback posted its ninth weekly gain against the Cedi this week after US employment data showed that the US economy created more jobs than expected in November supporting a Fed stance of putting on hold its rate cuts. US nonfarm payrolls increased by 266,000 jobs in November beating expectations and boosting confidence in the Dollar.
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 5.5397 [December 9th, 2019] indicating a 14.71% 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 5.6917 [December 9th, 2019], representing a 16.68% year-to-date depreciation of the Cedi against the US Dollar.