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Cedi Watch: Planned 7-year bond issue and weekly fx sales by BoG to boost GHS

The GHS weakened marginally by 0.03%w/w against the USD to GHS4.4058, but expectations of inflows from offshore investors participating in a 7-year bond issue and the central bank's plan to launch a weekly fx auction to match demand could boost the GHS this week.

The local currency has remained strong against the USD this year compared to the previous year as shown in the chart below. We remain bullish on the outlook for the local currency against the USD on the back of strong gross international reserves of about US$6.94 billion (3.8 months of import cover), which should enable the central bank to intervene in the market to support the local currency via a planned weekly fx sales to meet demand.

In addition, Ghana's current account deficit continues to narrow on the back of trade surplus emanating from increased export revenues and lower non-oil imports. Central bank figures indicate that the current account deficit narrowed to 4.6% of GDP in December 2017 from 6.6% of GDP in December 2016, buoyed by a trade surplus of US$1.07 billion (2.3% of GDP) in December 2017 from a trade deficit of US$1.77 billion (4.2% of GDP) in December 2016. Ghana's export revenue increased by 23.5%y/y to US$13.75 billion in 2017, driven by increased oil production and favorable commodity prices (crude oil and gold).

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