The Ghana cedi has made a notable recovery against the US dollar, appreciating by 1.38% on the retail market last week. This reversal of fortunes has narrowed the year-to-date depreciation to 2.05%. The cedi also strengthened against the euro, gaining 0.61% in value.
Conversely, the cedi depreciated by 0.26% against the pound, with one pound trading at GHยข19.45. As of the start of this week, the exchange rate stood at GHยข16.10 to the US dollar.
Analysts attribute the cedi’s relative stability to a reduction in speculative demand, following the Bank of Ghana’s announcement of a US$170 million 7-day forward auction to meet demand.
According to the Bank of Ghana’s Monetary Policy Report, the cedi faced intermittent pressures during the first three quarters of 2024, but regained some value in the final quarter.
The report cited increased demand for foreign exchange to support energy-related payments, uncertainty surrounding external bond restructuring, and election-related jitters as factors that exerted pressure on the currency.
By the end of the third quarter, the cedi had depreciated by 24.8% on a year-on-year basis. However, Ghana’s Real Effective Exchange Rate (REER) index ended 2024 at 135.3, down from a peak of 156.2 in October 2024.
Meanwhile, Ghana’s gross reserves ended December 2024 at US$8.98 billion, with a trade balance surplus of US$4.98 billion.
Looking ahead, Databank Research expects the combination of higher import costs and a stronger US dollar to put pressure on the cedi in the coming weeks, particularly as demand in the manufacturing and energy sectors rises alongside speculation of a potential decline in crude oil prices.
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