Cedi depreciates 0.6% against dollar but appreciates by 3.6% against Euro
The local currency for the month of July 2021, recorded a depreciation rate of 0.6 percentage points against the green buck.
The depreciation follows months of declining appreciation rate against the world’s strongest currency – the American dollar.
In the month of April, the cedi appreciated by some 0.5 percent against the dollar, but then declined in its appreciation rate to 0.2 percent in May.
The cedi failed to appreciate against the dollar in June, and then depreciated by 0.6 percent in July.
The depreciation of the cedi is despite strong dollar reserves held by the Bank of Ghana (BoG) which is in the region of $11 billion and 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.
Despite depreciating against the dollar, the cedi however, posted some strong gains against the Euro.
The cedi appreciated by some 3.6 percentage points against the Euro for the first seven months of the year.
A perusal of the Central Bank’s July 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.
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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 1.2 percent in July.
Meanwhile, Databank Research is forecasting an average end-year depreciation of Ghs 6.18 pesewas of the local currency to the dollar.
The favourable forecast by the research arm of the investment bank, follows expectations that the cedi will replicate its sterling performance against the dollar in 2020.
The cedi last year, cumulatively depreciated against the dollar by 3.9 percentage points making it one of the best-performing currencies in Africa.
Its impressive 3.9 percent depreciation rate for 2020 was also the cedi’s best performance since 2017 when it depreciated by 4.9 percent.
At the moment, the cedi’s exchange rate to the dollar, stands at Ghs 5.95 pesewas to a dollar.
