The cedi’s perennial struggles against the US dollar does not seem to go away as this year’s performance is rated as the worst in the three-year-old Akufo-Addo administration.
According to data from the Bank of Ghana, the cedi depreciated by about 10.6 percent against the greenback compared to the 8.21 percent depreciation achieved last year.
Even the 2018 performance was worst off when compared to 2017 where the cedi showed a rare determination to shed 3.27 percent of its value against the US dollar.
This year’s performance was set off by the Bank of Ghana’s decision to reduce its monetary policy rate by 100 basis points to 16 percent in January.
That rate action caught foreign investors in our domestic market unaware, and being unhappy about the decision which ultimately meant a reduction in interest rates, they proceeded to sell off their investment.
As investors moved out, it meant more dollars were needed, and that shortage drove up the price of the dollar leading to a rapid depreciation of the local currency.
At its peak, the cedi depreciated by about 5 percent in a matter of weeks, and the mere fact that the entire previous year it had depreciated by about 8 percent made it even scarier.
The inflows from the US$3billion Eurobond provided the Bank of Ghana with forex that was used to cure the shortage. Also, the bank announced a number of measures that were tailored to regulate forex trade which was dominated by undocumented transactions.
Apart from the forex market conduct rules, the central bank also on October 1 this year, commenced forward sales purchases of forex.
According to Bank of Ghana (BoG) data on the movement of the currency, the cedi as at December 13, had lost almost 13 per cent of its value to the US dollar compared to the same period in 2018, when it shed about 8.2 per cent to the US currency.
The December 13, 2019 depreciation rate is now the highest in the last four years, although it was a few percentage points shy of the 15.7 per cent depreciation recorded in the whole of 2015.
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