Analyst predicts Cedi's continuous stability against the dollar in the first quarter of 2020, here is why

The Head of Trading at Absa Ghana, Jacob Brobbey, has said that the Ghana cedi, will continue to enjoy stability against the dollar at least for the first quarter of the year.

Cedi against dollar

The Bank of Ghana (BoG) indicated that so far, the local currency has appreciated about 4% in value against the dollar since 2020 started.

In an interview with Accra-based Citi FM, Mr Brobbey said the cedi’s 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.”

“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 added.

He also indicated that another contributing factor 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.”

Cedi’s performance in 2020 so far

The cedi has appreciated against its major trading partners in the first month of 2020. Data released by the BoG showed that the local currency appreciated against all the three major currencies, the dollar, euro and pound sterling.

The Central bank’s latest Summary of Economic and Financial Data showed that the cedi in the first month of the year has so far appreciated 0.3% against the dollar, made a 1.9% gain on the British pound while recording a 2.3% appreciation against the Euro.

In 2019, the cedi depreciated 12.9%, 15.7% and 11.2% against the dollar, pound and euro respectively.

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