Cedi posts 1.28% net appreciation in July 2023, firms against US dollar
In a recent analysis conducted by GCB Capital Research, the Ghanaian Cedi has demonstrated commendable resilience, maintaining its stable footing amidst growing concerns about near-term reserve vulnerability.
Courage Boti, the Research Lead at GCB Capital, highlights the Cedi’s impressive performance, extending its purple patch throughout July 2023 with a noteworthy 1.28% net appreciation against the US Dollar on the retail market. This uptrend reflects a commendable growth of 0.6% week-on-week.
However, a closer examination of the Cedi’s standing in the interbank market reveals that it has remained almost unchanged against the US Dollar during the month of July. Trading activities on the interbank front have shown minimal fluctuations, resulting in the Cedi closing flat at the end of the previous week.
Despite the Cedi’s triumphant run since February 2023, the Ghanaian economy is not entirely insulated from potential shocks. As the year progresses, the nation’s reserve buffer continues to be a focal point of concern, with projections indicating that it may cover merely 0.8 months of import by December 2023.
This assessment, which considers adjustments for petroleum funds and encumbered assets, implies that the reserve cushion remains weak, posing a critical challenge to the country’s economic outlook in the near term.
Consequently, the lingering vulnerability of the reserve buffer could pose headwinds to the Cedi’s near-term prospects. As the Ghanaian authorities navigate the challenges at hand, a cautious approach may be necessary to safeguard against potential external shocks and maintain stability in the currency markets.
While the Cedi’s recent performance has been admirable, there is no room for complacency, given the precarious reserve situation. The delicate balance between stability and vulnerability will undoubtedly shape the financial landscape, with stakeholders closely monitoring how policy measures evolve in response to this ongoing challenge.
