BoG consolidate gains made by the cedi against the dollar
The Bank of Ghana has taken some measures to consolidate recent gains made by the cedi against the US dollar.
Recent data shows that the Bank of Ghana has been a little bit heavy on the market in terms of its dollar intervention since last week.
There has been some dollar sales to commercial banks just this week, with the sale being described as very necessary. The Central Bank on Wednesday, December 29 sold about $23.6 million to commercial banks, the Central Bank again sold $8.3 million n Thursday, December 30.
While the Bank of Ghana wants to see this move as a normal banking operation in help stabilizing the cedi, some analysts are however of the view that, these actions have contributed to the current performance of the cedi.
The local currency’s rate of depreciation against the dollar has somehow slowed substantially over the past week.
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Some banks have said that some of these measures by the Bank of Ghana, have indeed helped in stabilizing the cedi, adding that, the cedi might not witness any serious depreciation before the end of the year.
But for some, they say that the Bank of Ghana can not continue in intervening on the market to stabilize the cedi because it does not print dollars but has to depend on other activities to get the dollars.
With this some have also argued that, the central bank selling some dollars on the market to help stabilizing the cedi is not sustainable and so the time has come for other fiscal measures to be looked at carefully to help stabilize the Ghanaian cedi.
Cedi depreciates 9% on retail market
Meanwhile, the local currency is said to have depreciated by some nine percentage points (9%) on the retail market.
On the interbank market, the cedi is said to have also depreciated by some three percentage points (3%).
This, analysts and currency traders have described as a mixed performance of the local currency with few days to the end of 2021.
Compared to that of last year, the performance of the cedi has been slightly worse, marginally beating forecasts of analysts.
The depreciation of the cedi is despite increased dollar inflows from the Bank of Ghana as well as remittances from abroad in the last few weeks to end the year.
Senior Currency Analyst at Databank Research, Courage Martey, has noted in an interview that, “The cedi’s performance in 2021 can be said to be that of a mixed performance; if you look at the trend in 2021 and if you compare the full year performance in 2021 and full year performance in 2020.”
“Now in 2020, the average depreciation across the interbank and retail market was about 3%. This year we’ve had a bit of divergence in this performance levels, so that on the interbank market average performance currently is around 3%, but on the retail market it depreciated significantly and we are doing currently 9% year-to-date”, he pointed out.
According to Mr. Martey, the volatility of the currency this year makes it difficult to predict the outlook of the local currency.
“So that divergent, that spread emphasizes the volatility or the pressure that the currency endured in the second half of this year and mostly the 4th quarter of this year. And that made it very difficult for us to see clearly what the outlook is for the cedi,” he stated.
