Expected Depreciation Of Cedi Against US Dollar As Foreign Exchange Demand Rises

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The Ghanaian cedi is facing its third consecutive week of weakening against the US dollar, primarily driven by increased foreign exchange demand from local corporates and importers in preparation for the upcoming Christmas season. This surge in demand has put pressure on the local currency, prompting concerns about its future performance.

To address the situation, the Central Bank of Ghana recently conducted an auction where $20 million was allocated to Bulk Oil Distribution Companies, while an additional $2.0 million was allocated for spot market interventions. However, many analysts argue that these interventions were insufficient to fully meet the persistent foreign exchange demand.

Despite the depreciation trend, it's worth noting that the rate of depreciation is not currently alarming. Last week, the Ghanaian cedi depreciated by 0.17% against the US dollar, reaching a closing rate of ¢11.84. On the retail market, it also experienced depreciation against the pound and the euro, losing 0.86% and 0.60%, respectively.

However, the performance of the cedi on the interbank market was more mixed. It registered a week-on-week depreciation of 0.73% against the US dollar but recorded a marginal gain of 0.06% against the euro. Interestingly, it remained stable in relation to the British pound.

While the depreciation of the cedi against major currencies is a matter of concern, it's important to assess the overall market dynamics and consider various factors that influence currency exchange rates. The foreign exchange demand arising from local corporates and importers in anticipation of the Christmas season is one of the main drivers behind the current weakening of the Ghanaian cedi.

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It's vital for the Bank of Ghana and relevant stakeholders to closely monitor the situation and assess the effectiveness of interventions to mitigate the depreciation of the cedi. Additionally, improving the country's export capacity and encouraging investments that boost foreign exchange inflows can help to stabilize the currency.


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