Cedi shows signs of recovery amidst improved liquidity
THE Ghana cedi demonstrated notable gains last week against the US dollar and other major foreign currencies, marking a positive shift after a prolonged period of depreciation. This recovery was primarily driven by enhanced market liquidity and strategic interventions by the Bank of Ghana (BoG).
Factors behind the cedi’s recovery
The cedi’s recent upturn can be attributed to several factors. Improved liquidity in the foreign exchange market played a crucial role in stabilizing the cedi. Additionally, there was a resurgence in corporate demand, largely influenced by seasonal purchasing pressures as businesses prepare for the upcoming yuletide festivities.
To support the cedi, the BoG actively engaged in market interventions. Over the past week, the Bank sold US$37 million during a 7-day forward auction and an additional US$20 million to Bulk Oil Distributing Companies. These measures were aimed at alleviating some of the pressures on the cedi and boosting its value.
Performance against major currencies
Following the Bank of Ghana’s interventions, the cedi appreciated by 0.46% against the US dollar on a week-on-week basis, ending the week at a mid-rate of GH¢16.40 per dollar. The cedi also saw gains against other major currencies, rising 0.47% against the British pound and 0.56% against the euro.
Outlook for the week ahead
This week, attention will be on the US Federal Reserve’s upcoming meeting, where policymakers are expected to deliberate on the direction of US interest rates. Market speculation is leaning towards a potential rate cut, which could influence the US dollar’s strength. Last week, the US dollar index fell by approximately 100 basis points, ending at 101.114 points. Analysts anticipate that any further weakness in the US dollar could provide additional support for the cedi.
In light of these developments, the cedi is expected to receive some cushioning against further depreciation, bolstered by both the Fed’s anticipated policy decisions and ongoing BoG interventions.
Current market status
As of the start of this week, the cedi is trading at GH¢16.41 per dollar on the retail market. Despite the recent gains, it has depreciated by 25.81% against the US dollar since January 1, 2024.
Overall, while the recent improvements in the cedi’s performance offer a hopeful outlook, continued monitoring of both domestic and international economic factors will be essential for assessing its future trajectory.
