Prof Gatsi criticizes BoG’s warning to currency speculators; says speculators legitimate market players

Dean of the University of Cape Coast Business School, Prof John Gatsi, has described as ‘desperate’ the Central Bank’s warning to speculators that they would regret betting against the cedi.

According to Prof. Gatsi, the Central Bank instead of threatening speculators should rather put in place the needed measures to make speculation less profitable.

Asserting that speculators are legitimate and rational market players who take advantage of changes in market conditions to make a profit.

“In the matter of depreciation of the Ghana cedi, speculators are legitimate market players who take advantage of changes in market conditions be it forex, stocks, bonds, and futures to make profits. They are rational and make good sense of market information to gain. Transparency, robust market information, and stable regulations calm down the risk taking behavior of traders and ensure stability.

“Threats by the regulator such as warning traders they will lose because new measures have been put in place are signs of desperation and even more worrying is to put information about possible inflows of foreign currency at a future date to change the risk-taking behavior of traders signals that we don’t have enough foreign currency supply.

“If supply is good, the so called speculators will not create a different scenario. Let people have confidence and stop investing in foreign currencies. Speculators exploit opportunities in half-baked information in the forex market. Manage the economy well and make speculation less profitable,” he quipped.

The Governor of the Central Bank, Dr Ernest Addison, during the 118^th MPC press briefing warned speculators that they would regret betting against the local currency.

According to the Governor, the BoG remains fully committed to providing stability in the exchange rate for the cedi.

“The bank has enough foreign exchange reserves to support the market and economic agents should stop engaging in speculative purchases as they will suffer economic losses when the correction occurs,” he noted.

The cedi declined 0.3% to a record low of GHS 14.646 per dollar on Monday following the BoG’s decision to maintain its policy rate for the second consecutive time.

The Cedi has lost 10.5% of its value against the dollar since late March making it the worst performing currency in the world over the period.

Source: Norvanreports