This 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.
“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.
Additionally, the IMF is here, which ought to make dollar support possible.
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.
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.
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.
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.
Other emerging currencies that outperformed this week include the Vietnamese dong, Chilean peso, Costa Rican colon, and Chinese yuan.
