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Business News of Tuesday, 27 October 2015

Source: Ghanaian Times

Cedi to consolidate gains

Dr Henry Kofi Wampah - BoG Governor Dr Henry Kofi Wampah - BoG Governor

The cedi is likely to take advantage of a more consistent flow of dollars to the market from the Bank of Ghana, which has resumed selling, to consolidate gains made in the last few days.

The currency, which rebounded in July after slumping nearly 30 percent in the first half of the year, was trading at 3.7900 lastThursday.

On the same day, an Accra trader put the cedi at 3.82 against the dollar.

“This week the cedi could hold firm against the dollar at least, and may likely extend the gains it has made in the last few days of last week, as dollar supply to the market remains consistent,” Joseph Amponsah of Dortis Research told Reuters in Accra.

The government launched a Eurobond at a 10.75 percent coupon rate this month and signed a $1.8 billion loan deal in Paris in September for 2015/16 crop purchases.

Both of these factors should support the cedi in the months ahead.

The naira is expected to hold steady against the dollar this week as the central bank tightens requirements for foreign exchange trading to support the local currency on both the official interbank and parallel markets.

The regulator said last week it would start to verify customers’ bank biometric identification by November 1, as part of dollar requests.

Operators said the move was meant to help the central bank trace all transactions in the foreign exchange market in a bid to curb speculation.

The naira was trading at 225 to the dollar on the parallel market last week, the same level it closed the previous week while the local currency appreciated marginally to 196.98 to the dollar on the official interbank market against 197 to the dollar set last Monday, traders said.

The exchange rate of the naira is pegged at the official window in the wake of falling global oil price to preserve hard currency reserves in Africa’s top economy.

The Kenyan shilling is expected to strengthen, mainly due to unusually high government debt yields attracting dollar inflows from foreign investors.

The shilling was trading at 101.80/102.00 per dollar last Thursday, up from 103.00/10 at the previous Thursday’s close.

“We’ve seen massive inflows from people coming in for treasury bills,” said a trader at one Nairobi-based commercial bank, referring to foreign investors who have been attracted by interest rates of more than 20 percent, far above what Kenya usually pays for short-term debt.

The strengthening will continue as long as the yields remain high, the trader said. The local currency is also expected to get a boost next month as companies buy dollars to meet their end-month costs.