The cedi, the currency of Ghana, in the previous week, outperformed all other currencies against the dollar. The cedi, which had terrible performance in the previous months, has suddenly acquired strength and is now the currency with the best performance right now.
Strong signs point to the debt-ridden nation getting closer to receiving an International Monetary Fund (IMF) bailout.
A report carried by Bloomberg which was sighted by DGN Online stated that “The currency was the cheapest in Africa, more than 30% undervalued versus its 25-year history last week, so some rebound after the huge fall recently isn’t that surprising,” said Charles Robertson, the global chief economist at Renaissance Capital Ltd. in London. “Also we have the IMF in town, which should pave the way for dollar support.”
Gains occurred even as holders of the African country’s dollar-denominated sovereign bonds braced for capital losses and its local-currency sovereign bonds entered what Fitch Ratings described as a “default-like process.” In order to get a $3 billion IMF loan and put Ghana’s debt on a manageable course, the restructuring is required.
In the midst of the dollar’s largest quarterly loss since 2010, investors are returning to some of the riskiest regions of developing economies. They are wagering that the dollar will continue to suffer in the coming months as a result of the Federal Reserve’s transition to a less aggressive monetary policy.
The cedi strengthened last Friday below GHC13 per dollar, reaching its highest closing level since October.
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.
The Vietnamese dong, Chilean peso, Costa Rican colon, and Chinese yuan are some other emerging currencies that performed better in the previous week.
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