The Head of Trading at Absa Ghana, Jacob Brobbey, says the local currency will continue its strong performance against the dollar at least for the first quarter of the year.
So far, the local currency, according to the Bank, has appreciated about four percent in value against the dollar since the start of the year.
Speaking to Citi Business News, Mr. Brobbey said the cedi’s strong performance can be attributed to some four factors.
“The first is a race on for emerging markets assets including Ghana. The second is the planned FX forex auction by the Bank of Ghana which is about US$750 million.”ADVERTISEMENT
“The planned FX auction which was announced in the latter part of last year gives corporates on the market some bit of certainty. Once corporate customers have certainty then you would expect that there would not be much speculative activity because they would only buy FX as and when they need it,” he noted.
He further stated that another factor contributing to the strong cedi is the positive reviews from credit rating agencies, Moody’s and Fitch for Ghana recently.
“This has given offshore investors some bit of confidence. The last one is probably the government’s decision to issue a US$3 billion Eurobond a bit earlier than usual. If you look at previous issuance it has normally been done around March/April. I think for the first quarter of this year, the currency is likely to remain very stable if not perform much better,” he added.
The local currency has enjoyed a good run against its major trading partners in the first month of the year — appreciating against all the three major currencies, the dollar, euro and pound sterling, according to data released by the Bank of Ghana.
The cedi, which depreciated against all the three currencies last year, has found a renewed strength and has so far held its own to make gains on its trading partners.
According to the Bank of Ghana’s latest Summary of Economic and Financial Data, the cedi in the first month of the year has so far appreciated 0.3 percent against the dollar, made a 1.9 percent gain on the British pound, while recording a 2.3 percent appreciation against the Euro.
Last year, the cedi depreciated 12.9 percent, 15.7 percent and 11.2 percent against the dollar, pound and euro respectively.