Following a downgrading of the country's sovereign debt by rating agency Fitch, the Ghana cedi experienced a record weekly fall in trade on the interbank market.
According to analysts, the local unit suffered significant losses in the interbank market as the cedi's value versus the dollar continued to decline due to persistent foreign exchange demand.
During the FX forward auction last week, the Bank of Ghana offered $25 million against total bids of $109.25 million. The resulting bid-to-cover ratio, which was 4.37 vs. 4.31 in the prior auction, emphasises the discrepancy between supply and demand as need for foreign cash rises.
On the interbank market, the cedi fell against the US dollar 13.12% week over week (-35.01% overall).
On the retail foreign exchange market, it was relatively stable, losing 0.49% week-on-week with a bid/offer quote of ¢10.10/10.45, extending its year-to-date depreciation to about 36.84%.
Last week, Fitxh downgraded Ghana’s sovereign Issuer Default Rating from ‘CCC’ to ‘CC’, citing an increased probability of debt restructuring, high debt service, constrained financing, and continued foreign exchange reserve pressure, among others.
This, coupled with a US Fed hike by 75 basis points, has dampened foreign investor sentiment as investors seek safe-haven US dollar.
Databank Research said “we expect FX inflow from the $1.3 billion syndicated loan to supplement FX supply, although market sentiments continue to be dulled with talks of debt restructuring yet to be confirmed by the government”.