immediately foreign exchange markets It’s a tough ride in 2022, but in some countries, a combination of geopolitical pressures and central bank mistakes have sent currencies into a “death spiral”.
The dollar’s rally over the course of the year, as investors flocked to the traditional “safe haven” amid a wave of geopolitical and macroeconomic shocks, hit many emerging market currencies hard.
Johns Hopkins University applied economics professor Steve Hanke publishes a regular list of the worst-performing currencies for this year, in which the Ghanaian cedi is close to the top spot, according to CNBC, which was seen by Al Arabiya .net.
El Sedi made a new all-time low against the dollar on Wednesday of last week, at one point registering 14.24, before recovering slightly. Overall trading began at just over 6 cedis to the dollar, according to Refinitiv data, meaning the US currency has appreciated more than 1.3 times against the West African country’s currency.
Hanke said on Twitter last week that the cedi is “central bank junk” and suggested the country “shut down its central bank and install a currency board” to restore order.
Zimbabwe and Cuba
However, the Cedi’s decline makes it the third worst-performing currency in the world this year.
In second place is the Cuban peso, which has lost 56.36% against the dollar, behind the Zimbabwean dollar, which has lost 76.74% of its price against the dollar since January. Both Zimbabwe and Cuba suffer from severe levels of inflation.
“Zimbabwe’s economic death spiral continues to spin,” Hankey said last week. National statistics agency ZimStat reported that the country’s inflation was 268% annually in October, but Haneke’s estimates place it at 417%. Similar to Ghana, Zimbabwean authorities have sought to shore up the local currency and fight inflation by cracking down on payments in Zimbabwean dollars.
Sky-high inflation is also a central problem in Cuba, where Haneke’s model puts consumer price increases at 166% per annum.
Egypt
Last week, the price of the Egyptian pound fell against the dollar to a new low, falling at 24.42, making its way onto Hankey’s list of 10 worst-performing currencies in 2022.
In turn, Fitch Ratings recently downgraded the country’s credit outlook to negative, citing the deteriorating external liquidity position and the risk of reduced access to the bond market. Meanwhile, Egypt’s foreign exchange reserves fell to less than $32 billion in October from $35 billion in March.
Fitch said Egypt’s funding problems are exacerbated by a $6 billion external debt maturity next year and another $9 billion in 2024.
“Despite the financial deals announced at the COP27 conference in Sharm El-Sheikh this week, continued investor outflow in general is likely to add to the Egyptian pound’s weakness against the dollar in the coming days,” said AZA Finance trader Mitch dedrick.
Other currencies on last week’s list include the Sri Lankan rupee, Venezuelan bolivar, Sierra Leonean lion, Burmese kyat, Lao kip and Ukrainian hryvnia.
