Cedi posts 1.7% YTD depreciation rate to the dollar
The cedi has recorded a year-to-date (YTD) depreciation rate of 1.7 percentage points against the dollar – from January to September 2021.
The depreciation follows months of declining appreciation rate against the world’s strongest currency – the American dollar – from January to May when it posted an appreciation rate of 0.2 percent against the dollar.
In the month of July, the cedi depreciated by some 0.7 percent against the dollar, it further depreciated by 1.6 percent in August and finally by 1.7 percent in September.
The depreciation of the cedi is despite the strong dollar reserves held by the Bank of Ghana (BoG) which is in excess of $11 billion as well as the weekly forex auction of dollars by the Central Bank aimed at ensuring that there is sufficient supply of dollars to businesses and hence less pressure on the cedi which usually result in the depreciation of the local currency.
Given the strong reserves of the BoG and its weekly forex auction, the depreciation of the cedi can be attributed to the gradual easing of the various factors – weakening of the dollar, Covid pandemic and less demand or pressure on dollar due to reduced imports – that influenced the strong performance of the cedi for most part of 2020 and the first few months of 2021.
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Despite depreciating against the dollar, the cedi however, posted some strong gains against the Euro.
The cedi appreciated by some 2.6 percentage points against the Euro in the month of September.
An examination of the Bank of Ghana’s September 2021 Summary of Economic and Financial Data indicates that the cedi since the start of this year has been gradual appreciating against the Euro posting a 1 percent appreciation rate in January, 2.4 percent in April and then 3.6 percent in July.
It has however, declined in its rate of appreciation as it appreciated against the Euro by 2.6 percent in September.
Unlike its performance against the Euro, the cedi with regards to its performance against the British Pound, has been depreciating since the start of 2021, recording a depreciation rate of 3.6 percent in May, 1.2 percent in July and 2.3 percent in September.
