The Ghana cedi registered a record weekly decline in trading in the interbank market after sovereign debt downgrade by rating agency, Fitch.
Analysts say the local unit posted heavy losses on the interbank market as unrelenting foreign exchange demand continued to weigh down the cedi against the dollar.
The Bank of Ghana allotted $25 million against total bids of $109.25 million during last week’s forex forward auction. The resultant bid-to-cover ratio of 4.37x vs 4.31x in the previous auction highlights the demand-supply disparity as demand for foreign exchange increases.
The cedi on the interbank market, lost 13.12% week-on-week against the US dollar (-35.01% year-to-date).
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”.