|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cryptocurrency News Articles
BoG’s Revamped Forex Rate Model: A Case of Déjà Vu?
Sep 28, 2024 at 03:11 pm
With less than a week to go before the third review of Ghana's latest International Monetary Fund (IMF) program ends, the authorities are scampering to show
Ghana's central bank will begin factoring all forex transactions among banks and between banks and their customers into the rate, a move to address the re-emergence of parallel FX exchange rates in the country.
The Bank of Ghana (BoG) will factor into the rate all the forex transactions among banks and between banks & their customers (above $10,000) in Ghana. The only “improvement” in this “revamped” model, though, is that the rate will now capture transactions with a cut-off time of 3:30 pm instead of the threshold of 2 pm in the previous model.
But why will the BoG try to present this less-than-revolutionary change as something epic?
The underlying problem is the re-emergence of Nigeria-style “parallel” FX exchange rates in Ghana. The “weighted median” or average rate published by the BoG daily, which is close to the Bloomberg one, has diverged significantly from what real people trying to buy FX on the open market often get.
For example, the BoG says the average USD-GHS selling rate for yesterday was ¢15.83. Yet, surveys by market research outlets show that forex bureaus were selling above ¢16.7. If one is lucky enough to get USD from a bank, the rate would have been at nearly ¢16. Fintech and card services providers quote above ¢17.
Large FX market premiums of this kind are intensely disliked by the IMF because they suggest underlying inefficiency.
The whole scheme raises a lot of questions, especially in light of all the muck surrounding the gold refinery the government is asking the BoG to invest in.
Promoting bullion as an investment option to stem dollar demand is a rational decision. The question, however, is scale.
A lot of investors have to be convinced. Purely from a technical analysis point of view, gold has one disadvantage compared to the dollar in Ghana's specific case. Contrary to claims by some researchers that gold is a “zero beta” asset, it actually fluctuates against relevant indices by quite a lot. In short, it is risky.
The dollar on the other hand has performed very steadily against the GHS over time. Since 1994, it has always gained value. In May 2023, some lecturers at Tarkwa and Takoradi used ARIMA to forecast USD-GHS rates for 2024 and 2025 at less than ¢12.5. They got it spectacularly wrong.
Thus, while it looks like one can almost always count on getting both the price increase return plus the dollar return by buying gold, history actually suggests otherwise.
Eg: if one had bought gold in 2012 and sold it in 2015, one would have made a ~72% nominal cedi profit. But buying $ would have yielded ~140%.
There is also the issue of BoG simply displacing gold that it could otherwise have sold for USD in the international markets to cater to local investors.
In some sense, therefore, the actual USD in circulation doesn't really change as the BoG has to forgo the benefits of increasing its own USD reserves and focus instead on serving local investors' appetite for a hedge against the Cedi's notorious depreciation streak.
If the gold coin model does scale, it is likely to cannibalise the treasury bill market more than dollar demand given the BoG's superior credit compared to the Govt of Ghana. It bears reminding readers that in the latest treasury bill auction, the undersubscription rate was more than 40%. It would be interesting to see how the govt would react if the gold coins thing caught on.
Disclaimer:info@kdj.com
The information provided is not trading advice. kdj.com does not assume any responsibility for any investments made based on the information provided in this article. Cryptocurrencies are highly volatile and it is highly recommended that you invest with caution after thorough research!
If you believe that the content used on this website infringes your copyright, please contact us immediately (info@kdj.com) and we will delete it promptly.
-
- The Royal Mint reveals its top ten rarest 50 pence coins currently in circulation
- Sep 28, 2024 at 06:25 pm
- The 50 pence piece has become the most valued and collected coin in the UK, with many collectable designs appearing on its heptagonal canvas.
-
- BlackRock (IBIT) Bitcoin ETF (BTC) Leads the Spot Bitcoin ETF Market
- Sep 28, 2024 at 06:25 pm
- BlackRock (IBIT) Bitcoin ETF (BTC) is at the forefront of the spot BTC ETF market. It boasts cumulative net inflows reaching $21.42 billion as of September 27.
-
- Blum Crypto Offers Daily Opportunities for Telegram Users to Engage and Earn Rewards
- Sep 28, 2024 at 06:25 pm
- This guide provides all the details you need to participate effectively, from securing your crypto assets to exploring new features within the app.
-
- FTX's $16B Repayment To Crypto Traders Could Trigger Massive Buying Pressure
- Sep 28, 2024 at 06:25 pm
- The District of Delaware's Chapter 11 decision on October 7 is key for repayments. Reinvestment of FTX funds into Bitcoin and Altcoin may drive market growth.
-
- As the presale progresses, it is anticipated that Rollblock will surge over 800% in Q4. Here’s why analysts are bullish.
- Sep 28, 2024 at 06:25 pm
- Vast Entertainment Options Set Rollblock Apart In A $465B Competitive Industry
-
- Hamster Kombat (HMSTR) Game Launches Airdrop and Debuts on Major Crypto Exchanges
- Sep 28, 2024 at 06:25 pm
- Telegram game Hamster Kombat has finally launched its long-awaited airdrop and started its debut on major crypto exchanges on Thursday.
-
- Mega Dice Presale Surges In FOMO Frenzy – Next Rollbit Coin?
- Sep 28, 2024 at 06:25 pm
- As the presale draws to a close, investors are making last-minute efforts to secure their $DICE tokens.
-
- Hamster Kombat (HMSTR) Price Prediction: HMSTR Aims For A Rebound
- Sep 28, 2024 at 06:25 pm
- The Hamster Kombat price surged 4% in the last 24 hours to trade at $0.006735 as of 10:44 p.m. EST on trading volume that plunged 67% to $344 million.
-
- Cheems: A New Meme Token Based on the Shiba Inu Doge Meme Figure
- Sep 28, 2024 at 06:25 pm
- As time progresses and innovation advances inside of the world of cryptocurrencies there is a new contender that's beginning to gain popularity and attract investors and meme makers.