Market participants are responding positively to measures announced by the monetary and fiscal authorities to address recent challenges in the local economy, with the cedi in particular recording modest gains against the US dollar, an analyst with Obsidian Achernar (OA) Markets has said.
In what was described as a pivotal week for the Ghanaian economy, the Bank of Ghana at the conclusion of its 105th Monetary Policy Committee (MPC) meeting announced an upward adjustment of 250 basis points (bps) on its benchmark policy, among other interventions.
Three days later the Minister of Finance, Ken Ofori-Atta, outlined a raft of measures aimed mostly at curbing expenditure, with an estimated GH¢3.5billion in projected savings.
Subsequent to these announcements, the cedi appreciated against the dollar on the interbank market, dropping from a high of GH¢8.3 per dollar in the second week of March to GH¢7.92 following Mr. Ofori-Atta’s announcements, the Vice President responsible for Interbank FX at OA Markets, Nikita Yao Gbordzi, has stated.
“The market responded favourably to these announcements on the back of positive sentiments from domestic and offshore participants… From my conversation with other stakeholders, things are not looking as dire as they were two weeks ago, and that is reflecting in the cedi’s price,” he said.
Mr. Gbordzi said the cedi’s performance following the announcements indicates that the recent depreciation is not solely a function of US dollar shortage but is largely informed by panic, hoarding and speculation.
“The sort of drop that we saw following the minister’s announcement shows that a lot of people had excess dollars to sell on the market but they were just buying it to hold,” he noted.
In addition to commending managers of the economy for the moves made to bring sanity, he noted that further positive developments hinge on implementation of the measures.
“We are seeing one of the most proactive and innovative central banks; one that has introduced measures like a viable forwards auction, which we have not seen much of in the past, and has been consistent in giving some forward guidance on rates. I believe they are doing their best under the circumstance, even though it might not be so apparent. We see the effort from central government as well, and I am optimistic that these moves are going to help over the long-term.
“The market has taken a positive stance on this so far, but I guess, now, the market is going to look to implementation of these measures to see; and from there’ll be more guidance as to which way the currency will go, but we expect it to be positive,” he explained.