Ghana’s cedi has emerged as the world’s best-performing currency against the U.S. dollar so far this year, according to a Bloomberg report.
The Bloomberg report says the currency extended its advance on Monday ahead of a $3 billion Eurobond sale that is expected to boost the government’s coffers.
Ghana’s cedi strengthened 3.9% in 2020, the most among more than 140 currencies tracked by Bloomberg, a turnaround from last year, when it weakened 13%.
Nana Yaa Faakye, Head of Treasury at Republic Bank Ghana Ltd, attributes the current development to the coronavirus outbreak and the recent lunar new year holiday in China, which she says have cut back travel and trade, bringing down demand for foreign currency from Ghanaian importers.
“With the impending Eurobond issuance, which is likely to increase foreign reserves, some buyers are betting that the cedi will strengthen further,” Faakye says.
The central bank’s tight monetary stance is also supporting the currency, said Steve Opata, head of financial markets at the Bank of Ghana. Market reforms including the introduction of forward-rate foreign exchange auctions since October, with a target of $715 million this year, are another factor in favor of cedi gains, he said.
Ghana’s cedi has been one of the strongest currencies in Africa. One U.S. dollar currently exchanges for 5.44 cedis. Experts have, over the years, attributed the West African country’s currency position to the country’s democratic ideals and its well-managed economy. Other financial analysts say its position is indicative of growth and macroeconomic stability.