Cedi expected to stabilize against dollar amid easing risk-off sentiments
The cedi is poised for a period of relative stability against the US dollar this week, as risk-averse investor sentiment begins to cool off. A surge in demand for the US dollar in the past week, despite a noticeable slowdown in inflation, resulted in a depreciation of the cedi, reminiscent of levels witnessed in the second quarter of 2023.
Efforts were made by the Bank of Ghana to address the situation, with a provision of $20 million in the 36th bi-weekly foreign exchange auction, primarily directed towards Bulk Oil Distribution Companies. However, this intervention proved insufficient to stem the tide of rising corporate demand for the greenback.
In the past week, the local currency saw a marginal decline of 0.46% against the US dollar. Conversely, it managed to gain 0.17% against the British pound while maintaining stability in its exchange rate against the Euro.
For the year to date, the Ghanaian cedi has witnessed a decline of approximately 11.6% against the US dollar in the retail market, and a more significant depreciation of about 22% against the American currency in the retail market.
The latest data from the Ghana Statistical Service (GSS) brings some positive news, as it reported a notable decrease in inflation for August 2023, with the rate standing at 40.1%. This decline can be attributed to a reduction in food inflation, which dropped from 55% to 51.9%, providing a slight respite for the currency.
In a further development, Fitch Solutions has revised its year-end 2023 forecast for the Ghanaian cedi, now predicting an exchange rate of ¢11.40 per US dollar, as opposed to the initial projection of ¢12.40 per US dollar. This adjustment reflects changing dynamics in the currency markets and hints at a potential turnaround in the cedi’s fortunes as the year progresses.
