Ghana’s cedi has emerged as the world’s best-performing currency against the U.S. dollar, according to a Bloomberg report.
The 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.
Bloomberg says among more than 140 currencies it tracked, Ghana’s currency has strengthened 3.9 percent in 2020, a stark contrast to last year when it weakened 13 percent.
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.
Steve Opata, head of financial markets at the Bank of Ghana tells Bloomberg that market reforms including the introduction of forward-rate foreign exchange auctions since October, with a target of $715 million this year, are also supporting the currency.
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.
The value of a particular currency determines its purchasing power in the international market. It also reflects its economic situation as compared to other countries.
Financial experts say that the stability of a country’s currency further helps to prevent frequent fluctuations in its value, and this provides investors with the necessary confidence to invest in the economy of a country.