TIG Post

Tag: Pound

  • BoG suspends CBG’s foreign exchange trading licence for a month

    BoG suspends CBG’s foreign exchange trading licence for a month

    The Bank of Ghana (BoG) has announced the suspension of the Foreign Exchange Trading Licence of Consolidated Bank Ghana (CBG), effective from 26th November 2024.

    The suspension, which will last for one month, was issued under section 11 (2) of the Foreign Exchange Act, 2006 (Act 723).

    According to the Bank of Ghana, the suspension was enforced following multiple breaches by CBG of the foreign exchange market regulations, including the Updated Guidelines for Inward Remittance Service for Payment Service Providers, issued in November 2023. The breaches also relate to violations of the Anti-Money Laundering/Combating the Financing of Terrorism & the Proliferation of Weapons of Mass Destruction (AML/CFT&P) Act, as well as the Accountable Institutions Guideline, dated December 2022.

    The licence will be restored after the suspension period if the Bank of Ghana is satisfied that CBG has implemented effective controls to ensure compliance with foreign exchange market regulations.

    For customers, this suspension means limited access to essential foreign exchange services. During this period, CBG will not be able to handle any currency exchange transactions, including buying or selling foreign currencies. This restriction impacts customers who may need to convert their cedi accounts into foreign currencies like the dollar or pound for travel, business, or international payments.

    The Bank of Ghana has entreated all foreign exchange market players to adhere strictly to forex market regulations and guidelines to maintain market stability and compliance.

  • Pound rallies as Liz Truss announces resignation

    The pound rose against the dollar and government borrowing costs dipped as investors reacted to Prime Minister Liz Truss’s resignation.

    Sterling hit $1.13 as the PM made her announcement, and then rose higher during Thursday afternoon.

    One analyst said investors were “relieved” by the news, despite a lot of uncertainty remaining.

    Business groups said the new prime minister would have to act quickly to restore confidence.

    Government borrowing costs rose sharply last month after the government promised huge tax cuts in its mini-budget without saying how it would pay for them.

    But these costs fell back after the Bank of England stepped in with an emergency support programme, and after Jeremy Hunt reversed nearly all the mini-budget measures when he became chancellor.

    Mr Hunt is due to announce plans for spending and tax on 31 October in his economic plan, which the Treasury confirmed was set to go ahead.

    “Although the resignation of Liz Truss as Prime Minister leaves the UK without a leader when it faces huge economic, fiscal and financial market challenges, the markets appear to be relieved,” said Paul Dales, chief UK economist at Capital Economics.

    He added that her resignation was “a step that needed to happen for the UK government to move further along the path towards restoring credibility in the eyes of the financial markets”.

    “But more needs to be done and the new prime minister and their chancellor have a big task to navigate the economy through the cost of living crisis, cost of borrowing crisis and the cost of credibility crisis.”

    Simon French, chief economist at Panmure Gordon, said the market reaction had been “fairly muted”, with investors waiting for the “detail of what comes next”.

    Pound dollar graphic

    Ms Truss said her successor would be elected in a Tory leadership contest, to be completed in the next week. Her resignation came after a key minister quit and Tory MPs rebelled in a chaotic parliamentary vote on Wednesday.

    Mr French said the markets could rally “more aggressively” if a clear favourite emerged for PM. “The sooner you get there the more likely the person who has won will have the support to do the difficult stuff.”

    The head of the CBI business lobby group, Tony Danker, said: “The politics of recent weeks have undermined the confidence of people, businesses, markets and global investors in Britain.

    “Stability is key. The next prime minister will need to act to restore confidence from day one.

    “They will need to deliver a credible fiscal plan for the medium term as soon as possible, and a plan for the long-term growth of our economy.”

    Source: BBC

  • The pound surges as the chancellor moves to calm markets

    On Monday, the pound gained and government borrowing costs fell as investors welcomed the news that Chancellor Jeremy Hunt is speeding up tax and spending cuts.

    In morning trading, sterling gained 1% against the dollar, trading around $1.13.

    The interest rate – or yield – on UK government bonds fell as a result of the announcement.

    The drop in yields suggests financial markets are welcoming the prospect of changes to economic plans.

    Monday is the first time the UK government bond market has reopened since the Bank of England’s emergency support programme ended on Friday.

    On Friday, Prime Minister Liz Truss sacked Kwasi Kwarteng as Chancellor and said the mini-budget “went further and faster than markets were expecting”.

    The mini-budget was blamed for causing turmoil in the financial markets. The aftermath of Mr Kwarteng’s announcements on 23 September saw the pound slumped to a record low of $1.03 and the cost of government borrowing rise sharply.

    “The chancellor will make a statement later today, bringing forward measures from the Medium-Term Fiscal Plan that will support fiscal sustainability,” a Treasury spokesman said.

    Mr Hunt is expected to fast-track many billions of pounds worth of tax and spending measures from his debt plan, announcing them a fortnight earlier than expected.

    It is the latest of a series of U-turns on policies announced in the mini-budget.

    The announcement of the £18bn U-turn on corporation tax on Friday and the firing of Mr Kwarteng did not appear to reassure investors, with UK government borrowing costs climbing on Friday afternoon.

    Investors warned that whatever Mr Hunt announces will need to “add up”.

    “I think you’ll see a positive reaction to the statement, assuming that the math adds up a bit more than it did before,” Shanti Kelemen, chief investment officer at M&G Wealth, told the BBC.

    “What we saw on Friday, as we had markets rise in the lead up to the news that Kwarteng was resigning, but then as soon as it happened, we had a sell-off afterwards.

    “So I think it’ll be important that the actual content of what’s being delivered adds up and has some more meat and numbers behind it than what we’ve seen previously.”

    The Bank of England stepped in to stabilize the financial markets following the mini-budget, announcing an emergency bond-buying scheme.

    Ms Kelemen said that the latest moves from the chancellor showed he acknowledged the government’s role in reassuring the markets.

    “They’ve recognized that the uncertainty is damaging the economy,” she said.

    “You also see the Bank of England won’t be supporting markets this week. So I think it shows the government is taking a bit more responsibility rather than relying on the Bank of England to buy all the debt.”

    The shift in the government’s economic policies and market turmoil in recent weeks has led to Goldman Sachs downgrading its forecasts for UK economic growth.

    The investment bank revised its 2023 UK economic output forecast from a 0.4% drop to a 1% contraction.

    Goldman said it expected a “more significant recession in the UK” in part due to “significantly tighter financial conditions” and the planned higher corporation tax rate from next April.

    Consultancy Pantheon Macroeconomics said the prime minister’s decision to appoint Mr Hunt as chancellor had “done little to shrink the risk premium embedded in UK assets”.

    “Households and businesses, therefore, are still facing a huge increase in their borrowing costs,” their analysts said.

    They added the forthcoming real-term reduction in government spending looked “set to be bigger than in the 2010s”.

     

  • Pound rising on reports of a mini-budget U-turn

    The pound has gained as speculation about a possible U-turn on the mini-budget has increased.

    On Friday morning, sterling was trading above $1.13 versus the dollar as the chancellor returned home early from the United States for urgent discussions in Downing Street.

    In September, the currency touched a record low of $1.03 as markets responded negatively to Kwasi Kwarteng’s mini-budget.

    In it he promised billions of pounds of tax cuts but did not explain how he would fund them.

    Government borrowing costs have also fallen, after surging to worrying levels in the days after the mini-budget.

    The Bank of England has been buying government bonds – known as gilts – to try to stabilise their price and prevent a sell-off that could put some pension funds at risk of collapse.

    However, that support is due to come to an end on Friday.

    There has been speculation it may be extended, although this was dismissed by the Bank’s governor, Andrew Bailey, earlier this week.

    The government has already U-turned on its plan to scrap the top rate of income tax, but many Conservative MPs think a further change of plan is imminent.

    Russ Mould, investment director at AJ Bell, said the financial markets were already pricing in a government U-turn.

    “They started to [price it in] yesterday,” he told the BBC’s Today programme.

    Mr Mould pointed to the fact that the yields – or the effective interest rate – on UK government bonds have been falling back in anticipation of a reversal to the tax-cutting plans. On Friday morning, the yield on bonds that borrow money over 30 years fell to 4.47%.

    “Gilt yields came down… and sterling rose against the dollar to $1.13 and against the euro to €1.16, so I think they are starting to either expect, demand, sniff out that there will be some degree of U-turn possibly on corporation tax, dividend tax, other areas,” Mr Mould said.

    Asked what would happen if there is no U-turn, Mr Mould said: “You would expect the gains that we’ve started to see, to unwind.”

    Bank of England support

    The government raises the money it needs for spending by selling bonds – a form of debt that is paid back plus interest in anywhere between five and 30 years.

    Pension funds invest in bonds because they provide a low but usually reliable return over a long period of time.

    However, the sharp fall in their value after the mini-budget forced pension funds to sell bonds, threatening to create a “downward spiral” in their prices as more were offloaded, which left some funds close to collapse.

    This sparked an emergency intervention by the Bank of England, which stepped in to buy bonds and prevent their price falling further.

    There has been strong speculation that the Bank will extend the scheme, which is due to end on Friday.

    But on Tuesday, Mr Bailey dashed those hopes, telling pension funds: “You’ve got three days left now and you’ve got to sort it out.”

    Bethany Payne, global bonds fund manager at Janus Henderson, told the BBC it was not clear whether pension funds have done enough to strengthen their finances.

    “The risk is that we don’t know how pension funds have used this window of time and whether they have used it effectively by raising cash and doing everything they need to,” she said.

    “So the true test of the market will be this afternoon and Monday morning to see whether they have done enough.”

  • The Japanese yen has reached a 32-year low against the US dollar

    The Japanese yen fell to a 32-year low versus the US dollar as official data revealed that prices in America rose faster than predicted.

    The yen sank to 147.66 per dollar before recovering some ground.

    Japanese Finance Minister Shunichi Suzuki said the government will take “appropriate action” against the currency’s volatility.

    In a rare move last month, Japan spent almost $20bn (£17.6bn) to prop up the country’s struggling currency.

    “We cannot tolerate excessive volatility in the currency market driven by speculative moves. We’re watching currency moves with a strong sense of urgency,” Mr Suzuki told reporters after attending a G7 finance meeting in Washington, DC.

    Last month, Japan intervened in the global currency market to help support the weakening yen.

    That move came after the yen hit a fresh 24-year low against the dollar, marking the first time that Japanese authorities had intervened in the currency market since 1998.

    However, analysts have warned that interventions like this would have little effect as long as Japan’s interest rates remain far lower than those in the US.

    The Japanese currency has come under increasing pressure in recent months, mainly due to the very different approach taken by the Bank of Japan (BOJ) in comparison with the US Federal Reserve.

    On Thursday, official figures showed that consumer prices in the US rose more than expected last month in a sign that the inflation fight in the world’s largest economy is far from over.

    Inflation, the rate at which prices rise, was 8.2% in the 12 months to September, down from 8.3% in August.

    Rising consumer prices in the US are being closely watched as the Federal Reserve’s efforts to cool inflation pushes up the value of the dollar as well as global borrowing costs.

    America’s central bank has been aggressively raising its interest rates to combat soaring prices, which has made the dollar more attractive to investors. In contrast, the BOJ kept rates very low.

    The dollar’s strength in the global financial markets is also having an impact on other major currencies around the world, including the pound and the euro.

     

  • Dollar breaks ¢11 mark; forex bureaus sell a dollar for ¢11.2

    The dollar has hit the ¢11 to $1 mark as some forex bureaus in parts of Accra are selling a dollar at an average of ¢11.2 on Saturday, October 8, 2022.

    Checks by Joy Business indicate that the demand for the dollar keeps surging, as there is very little dollars in circulation.

    Some forex bureau operators who spoke to Joy Business on condition of anonymity said the recent action by the Bank of Ghana has yielded little return.

    According to them, there are no dollars in circulation.

    But, they hope the inflows from the $1.13 billion cocoa syndicated loan will help improve supply and slow down the rate of depreciation of the currency. The first tranche is expected by the end of this month.

    On the interbank market, the Bank of Ghana quoted the dollar at 9.63 (selling) on Friday, October 7, 2022.

    Meanwhile, the cedi is also not faring well against the Pound and Euro.

    It is going for ¢12.5 to the Pound and ¢10.57 to the Euro respectively.

    Analysts say the local unit continues to post heavy losses on the interbank market as unrelenting foreign exchange demand continued to weigh down the cedi against the dollar.

    Demand exceeded supply by last BoG Forex Forward Auctioning

    The last Forex Forward by the Bank of Ghana indicated that demand exceeded supply by $75.25 million in the latest auction.

    This is compared with the $82.75 million recorded a month ago.

    Cedi loses 40% in value to the dollar – Bloomberg

    Bloomberg quotation had earlier put the depreciation of the Ghana cedi at 40.05% in value to the US dollar in nine months of 2022.

    This ranked it as the second worst-performing currency in the world in the 147th position, according to Bloomberg.

    Also, this decline in the local currency against the American currency is the worst in over three decades.

    Cedi loses 37.5% in value to a dollar as of September 30, 2022 – BoG

    However, the Bank of Ghana said the Ghana cedi depreciated by 37.5% to the US dollar as of the end of September 2022.

    At the same time, the cedi had depreciated by 24.1%, and 27.5% against the Pound, and Euro.

  • Cedi sells at GH¢11 to 1 dollar at bureaus, BoG at GH¢9.63 as of October 8

    On the Interbank forex rates from the Bank of Ghana on, October 7, 2022, the Ghana Cedi is trading against the dollar at a buying price of 9.6302 and a selling price of 9.6398.

    As compared to Thursday’s trading of a buying price of 9.6302 and a selling price of 9.6398. At a forex bureau in Accra, the dollar is being bought at a rate of 10.82 and sold at a rate of 11.00.

    Against the Pound Sterling, the Cedi is trading at a buying price of 10.7742 and a selling price of 10.7860 as compared to Thursday’s trading of a buying price of 10.8513 and a selling price of 10.8641.

    At a forex bureau in Accra, the pound sterling is being bought at a rate of 11.95 and sold at a rate of 12.25.

    The Euro is trading at a buying price of 9.4677 and a selling price of 9.4772 as compared to Thursday’s trading of a buying price of 9.4978 and a selling price of 9.5082.

    At a forex bureau in Accra, Euro is being bought at a rate of 10.45 and sold at a rate of 10.72.

    The South African Rand is trading at a buying price of 0.5380 and a selling price of 0.5387 compared to yesterday’s trading of a buying price of 0.5401 and a selling price of 0.5404.

    At a forex bureau in Accra, South African Rand is being bought at a rate of 0.45 and sold at a rate of 0.80.

    The Nigerian Naira is trading at a buying price of 45.2257 and a selling price of 45.2382 as compared to yesterday’s trading of a buying price of 45.2776 and a selling price of 45.3679.

    At a forex bureau in Accra, Nigerian Naira is being bought at a rate of 13.00 Naira for every 1 Cedi and sold at a rate of 15.50.

  • Coronavirus: Pound plunges to its lowest level in over 30 years

    The pound has fallen to its lowest level against the dollar since 1985, as the spread of the coronavirus pandemic spooks investors.

    It is currently trading at $1.15, a fall of almost 5% in just one day.

    It comes as financial markets tumbled again after major stimulus plans failed to quell fears about the economic impact of the virus.

    The Dow ended down 6.3%, while the S&P 500 fell 5.1% and the Nasdaq dropped 4.7%.

    Earlier the Dow and S&P 500 had plunged more than 7%, triggering an automatic temporary halt to trade, but shares recovered some ground as Congress appeared set to approve a relief bill.

    The pound’s weakness could partly stem from questions over how the UK government plans to pay for the emergency economic measures it has introduced, says Neil Wilson, chief analyst for Markets.com.

    “This is the worst sustained period of sterling selling that I can recall,” he says. “The government’s massive fiscal package undoubtedly means more borrowing for the UK economy – how do we pay for all this?”

    Meanwhile, the FTSE 100 index of top UK firms closed down 4%, with aerospace and travel firms among the hardest hit.
    ‘Economic fight’

    UK Chancellor Rishi Sunak revealed a £350bn stimulus package for UK firms on Tuesday, including £330bn of business loan guarantees.

    It included aid to cover a business rates holiday and grants for retailers and pubs, while help for airlines is also being considered.

    Despite this, investors are still flocking to the comparatively safer dollar, says Ranko Berich, head of Market Analysis at Monex Europe.

    “The UK’s response to the incoming coronavirus shock has been about as aggressive as possible in terms of monetary and fiscal policy, but this has done nothing to help sterling.

    “Idiosyncratic factors such as the UK’s monetary and fiscal response or Brexit are beside the point: this is about the US dollar, which is proving unstoppable as global financial markets stare into the abyss of crisis-like conditions,” he said.

    Investors say rescue measures can only blunt the pain, as countries close borders and order mass closures, bringing most economic activity to a halt.

    The US on Tuesday outlined a $1tn (£830bn) proposal to support the world’s biggest economy, which is expected to include direct payments to families, small business assistance and bailouts for airlines and other industries.

    In the US, large companies have already announced more than 3,600 job cuts or furloughs, according to research firm Challenger, Gray & Christmas. The firm said some nine million other jobs at local bars and restaurants could also be at risk.

    Car factories in the UK and elsewhere have halted production, while the slowdown has pushed other firms such as Laura Ashley and Flybe into administration.

    Concerns about the damage have spurred a widespread sell-off. France’s CAC 40 fell more than 6% while Germany’s Dax dropped more than 5%.

    Oil prices also plunged to levels not seen since the early 2000s, as demand contracts sharply, but exporters boost supply. The declines have even hit gold and government debt, which are typically considered less risky assets.

    Asian markets have fared better than the US and Europe in recent days, but were also lower. Japan’s benchmark Nikkei 225 ended Wednesday 1.7% lower, the Hang Seng in Hong Kong fell by 3.3%, and China’s Shanghai Composite lost 1.8%.

    Sterling’s fall to a 35-year low against the dollar is clearly troubling.

    It is down 12% since the beginning of last week, and 5% today alone. This is partly down to the strengthening dollar, due to its status as a “safe haven,” the inevitable result of global volatility in financial markets amid the Coronavirus pandemic.

    But those aren’t the only reasons for sterling’s weakness. The pound has sunk to to just over €1.06 against the euro- its lowest level since the depth of the financial crisis 11 years ago.

    The pound is likely to be at a record low on measures of its global value, to be calculated tomorrow.

    At the same time, UK government borrowing costs are creeping up, with the presumption these would stay “lower for longer” now being tested in global debt markets.

    Traders have raised a range of reasons for why the UK is being particularly singled out for attention.

    There is growing expectation of ever bigger fiscal injections to combat the economic impact of the pandemic and the UK is still very dependent on foreign flows of capital.

    Its strategy for dealing with the pandemic was seen, say traders, as an outlier amongst the world’s major economies.

    Then there is Brexit. The UK has the extra economic challenge of dealing with a fundamental change to trading arrangements with the EU, perhaps on WTO tariffs, in the middle of this pandemic.

    It is a very rough market out there, with some markets a little dysfunctional as traders are isolated away from their trading floors. But the UK is being singled out for especially tough treatment.

    Source: bbc.com