11th December 2022 12:17:09 PM
2 mins readThis week, Ghana's currency outperformed other currencies in relation to the dollar, fueling hopes that the indebted nation would soon be able to access a rescue from the International Monetary Fund.
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"The currency was the lowest in Africa last week, more than 30% undervalued compared to its 25-year history, so some return after the enormous decline recently isn't that surprising," said Charles Robertson, the global chief economist at Renaissance Capital Ltd. in London.
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Additionally, the IMF is here, which ought to make dollar support possible.
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The gains came even as the African nation put its local-currency sovereign bonds in what Fitch Ratings described as a “default-like process,” and the holders of its dollar bonds braced for capital losses. The restructuring is needed to put Ghana’s debt on a sustainable path and secure a $3 billion IMF loan.
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Investors are returning to some of the riskiest corners of emerging markets amid the dollar’s biggest quarterly decline since 2010. They’re betting that a Federal Reserve pivot to a less-hawkish monetary stance will continue to weigh on the greenback in the coming months.
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The cedi advanced Friday to 12.9648 per dollar, the strongest level since October on a closing basis. It’s still down 52% this year.
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Optimism on the cedi “is a combination of a somewhat more hawkish central bank, some progress on the restructuring front, and a bit of buying the news,” said Simon Quijano-Evans, the chief economist at Gemcorp Capital Management Ltd. in London.
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Other emerging currencies that outperformed this week include the Vietnamese dong, Chilean peso, Costa Rican colon, and Chinese yuan.
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