Shorting the Yuan, already?

The Bank of Ghana (BoG) has suspended its decision to invest 5% of foreign exchange reserves in emerging markets.

According to information from the Treasury Department of BoG, the increasing volatility of the emerging markets does not make it safe for the BoG to invest.

The decision would have seen the Central Bank invest part of the 5% in the Chinese Yuan to follow in the footstep of Nigeria.

The whole debate about investing in the emerging market erupted when economists around Africa supported the Central Bank of Nigeria to invest between 5% to 10% of its foreign reserve in the Chinese currency, Yuan, following the continuing weakening of the US dollar last year.

According to Nigeria, the Yuan will become an international currency while the debt turmoil in the EU adds to the urgency of diversifying its reserves.

There have been calls in Ghana to follow suit but an economist and director of the Centre of Policy Analysis, Dr. Joe Abbey, advised the Bank of Ghana against the move, advising that it should rather invest in gold if it feels threatened by the currency instability in the US and Europe.

The latest information from the BoG indicates that Ghana’s external fund managers have offered advice against investing in the Chinese Yuan and other emerging markets and this was expected to have happened last year September.

Ghana was expected to have invested in sovereign bonds and stocks in countries such as Brazil, China, Russia and others. Ghana has about 65% of its reserves in investments internationally; half of the 65 are in Europe.

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