Cedi weakens for third consecutive week amidst escalating corporate FX demand
According to GCB Capital Research, the Cedi concluded another trading week on a slightly weaker note against the US Dollar for the third consecutive week. This trend reflects the Cedi’s recent vulnerability in both the interbank and retail market segments. GCB Capital Research attributes this weakening to a notable surge in corporate foreign exchange (FX) demand during the week.
The Cedi’s decline occurred amidst a broader global strengthening of the US Dollar and tight FX liquidity conditions within the domestic market, highlighting the currency’s susceptibility to external factors.
At the beginning of the week, the local currency was quoted at levels of GHS 11.50/11.55 against the US Dollar. However, by the close of the trading week, it had edged slightly lower to levels of GHS 11.54/11.58. This modest stability was supported by a spot market liquidity intervention by the Bank of Ghana (BoG), amounting to approximately US$3 million in the preceding week.
Looking ahead, the Central Bank is set to conduct the next tranche of US$20 million auctions to the Bulk Oil Distribution Companies (BDCs) at the forward auction. Furthermore, the updated BDCs forward FX auction calendar for Q4 2023 indicates a continuation of the auction program at a monthly pace of US$40 million. This, in conjunction with efforts to mitigate intraday volatility, is expected to help maintain the Cedi within a predictable trading range.
However, sustaining stability during the seasonal pressures expected in Q4 2023 is contingent upon the successful completion of the first review of the International Monetary Fund (IMF) program, the disbursement of associated tranches, and the receipt of other catalytic concessional financing linked to the program. These factors will play a crucial role in determining the Cedi’s performance in the coming months.
