5 Reasons Cedi’s Loss Of Value Re-start Again

5 Reasons Cedi’s Loss Of Value Re-start Again

In the month of December, the Ghana Cedi regained almost all the value it lost in about six (6) months. The Ghana cedi, which peaked at above Ghc15 to a dollar, appreciated to below Ghc8 as of December 21st 2022.

Though we elaborated 5 Reasons Cedi Appreciated Over The Few Weeks [Cedi as a monkey business is just one reason], our team have also elaborated here the 5 reasons the Cedi will depreciate against the major foreign currencies again this year. It may be beyond the previous lows.

1. The virtual collapse of the domestic debt restructuring will most likely defuse the potential confidence the announcement of the domestic haircut was bringing to the economy. Under the auspices of the Trade Union Congress (TUC), all the labour unions declared a nationwide strike if pension funds are not exempted from the domestic restructuring. Eventually, the pension funds were exempted from the bond exchange program, making it impossible for the largest source of funds to be part of the program. This action will definitely call into question whether the program can still achieve it’s purpose.

2. The announcement of foreign debt restructuring will equally make foreign investors pull the brakes on their investment plans in the country. The lack of action from foreign investment will definitely dry up the source of foreign currencies for the country, which will put extra pressure on the small reserves of the country.

See also: Bank of Ghana Exchange Rates As At Friday 30th December, 2022 [Weekly Trends]

3. Huge investors have their own teams that determine the levels of macro economic indicators before taking action. The inability of the government to settle with labour unions over the percentage of base pay increase in the country will also keep investors waiting for such a conclusion before taking action.

4. The dollar trade as a “monkey business” will once again come into play. Buy low, sell high is the mantra of every trader. It is therefore imperative that currency traders will keep hoarding their currency and even professional traders who will buy in bulk, now that the currency has receded to a level favourable to them

5. Speculative activities. Genuine or negative speculations are part of currency trade worldwide, especially in floating exchange rate regimes. For traders who hope to sell their currency at a level for profits, they could even instigate a mass media campaign to achieve their goal.

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