Cedi plummets 3.88% against dollar; year-to-date depreciation hits 21.2%
The Cedi experienced a significant depreciation of 3.88% against the US dollar last week on the spot market, marking a year-to-date decline of 21.20%. The depreciation is attributed to the strengthening of the US dollar and increased local corporate demand for foreign exchange.
Despite this, the cedi began the week of June 18, 2024, stable, trading at GH¢15.70 at forex bureaus. The recent movement follows the US Federal Reserve’s announcement of a single policy rate cut this year, which was less than market expectations of two cuts.
This unexpected decision caused the US dollar index to surge by approximately 100 basis points week-on-week, putting additional pressure on the cedi against major trading currencies.
The cedi also fell by 2.43% against the pound and 2.87% against the euro last week.
In a potentially stabilizing move, the Government of Ghana and its official creditors have reached an agreement on debt restructuring. This agreement is anticipated to facilitate a $360 million disbursement from the International Monetary Fund, contingent upon approval at the IMF board meeting scheduled for June 28, 2024.
Analysts suggest that this influx of funds will bolster Ghana’s foreign exchange reserves, improve FX liquidity, and support the stabilization of the cedi in the near term.
However, in the immediate term, the cedi is expected to trade sideways due to the continued strength of the dollar and ongoing high demand for foreign exchange.
