The Ghanaian cedi has sustained its upward trajectory, appreciating against the US dollar and other major foreign currencies on the retail market.
As of the end of last week, the cedi had narrowed its year-to-date loss to 1.43% against the US dollar, marking an improvement over the 1.85% recorded during the same period last year.
Key Factors Contributing to the Cedi’s Stability.
The cedi’s stability can be attributed to subdued market activity and increased foreign exchange interventions by the Bank of Ghana. The central bank’s efforts to support the local currency have yielded positive results, with the cedi appreciating by 1.11%, 0.78%, and 0.6% week-on-week against the US dollar, pound, and euro, respectively.
Foreign Exchange Interventions by the Bank of Ghana
The Bank of Ghana has stepped up its foreign exchange support, offering a total of US$320 million to corporate demand. This intervention has helped curb speculative pressures and contributed to the cedi’s stability. Analysts expect the central bank’s sustained support to lead to frequent nominal appreciations, assuming all other factors remain constant.
However, analysts also caution that any slowdown in intervention could trigger higher demand expectations, potentially straining the local currency. As Databank Research noted, “We believe sustained support could lead to frequent nominal appreciations, all things being equal; however, any slowdown in intervention could trigger higher demand expectations, potentially straining the local currency.”
Outlook for the Cedi
Looking ahead, analysts expect early buffer build-ups amid corporate demand, particularly from the energy and manufacturing sectors, to impact the local currency in the coming weeks. Nevertheless, decisive and consistent interventions by the Bank of Ghana may avert this impact.
The Bank of Ghana’s January 2025 Summary of Economic and Financial Advisory reported that the cedi lost 2.4% in value to the US dollar in January 2025. On the interbank market, the local currency traded at a rate of GHΒ’15.06 to the US dollar.
As of the end of last week, the average exchange rate stood at GHΒ’15.81 to one US dollar, with the cedi beginning the week selling at GHΒ’15.85 to one dollar.
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