Cedi falls to record as foreign investors avoid Ghana bonds

The Ghana cedi slumped to a record against the dollar after a dovish tilt by the Bank of Ghana reduced the appeal of fixed-income assets, sapping foreign-investor demand for the country’s bonds.

The cedi has weakened 8.6 per cent this year, the most among more than 140 currencies tracked by Bloomberg, after the central bank unexpectedly cut its benchmark rate in January and signaled more easing may be in store.

Out of the 2.1 billion cedis ($391 million) of two-year and longer-dated maturities sold by the government through Jan. 31 this year, foreign investors bought just 6.3 per cent, according to data from the Central Securities Depository Ghana Ltd. That compares with more than 30 per cent in 2018.

“Declining capital inflows from offshore demand for the country’s cedi bonds, coupled with maturities not being rolled over, will affect foreign-exchange supply on the market going forward,” Gaimin Nonyane, a senior macroeconomic specialist at Ecobank Group in London, told Bloomberg on phone.

“Companies stocking up on dollars before transferring earnings in March also weighed on the cedi,” she said.

The cedi declined as much as 0.5 per cent on Friday to the weakest level since Bloomberg started keeping the records in 1994, before reversing losses to trade 2.2 per cent stronger at 5.3772 per dollar by 4:38 p.m. in the capital, Accra.

A member of the Bank of Ghana’s Monetary Policy Committee said this month rates could be eased further as early as March, following the 100 basis points cut to 16 per cent on January 28.

A planned Eurobond sale may support the currency as the central bank uses proceeds to replenish its foreign reserves.

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