Cedi’s downturn persists amidst growing corporate FX demand pressure
The Cedi continues to grapple with a persistent bearish trend, extending its decline for over three weeks. This weakening trajectory has been primarily attributed to heightened foreign exchange demand pressures, largely influenced by seasonal dynamics.
Throughout the week, the Cedi faced significant challenges, as reflected in key exchange rate movements. Notably, the interbank reference mid-rate for USD to GHS closed the week 0.96% weaker, marking a year-to-date depreciation of 24.9%. Concurrently, the Cedi exhibited sharp depreciation against the British Pound (GBP) and the Euro, registering weekly losses of 0.96% and 1.66%, respectively. The year-to-date figures paint a similar picture, with declines of 14.7% against GBP and 24.4% against the Euro.
Corporate demand for foreign exchange has remained robust, further exacerbating the Cedi’s downward trajectory. This persistent demand is compounded by the limited availability of foreign exchange offers in the market, placing substantial pressure on the local currency.
The Bank of Ghana (BoG) has responded to these challenges by intensifying its market surveillance efforts. The resulting slowdown in market activity is a clear indicator of the central bank’s commitment to restoring stability. Additionally, the BoG has sustained intra-day liquidity support, with daily sales of an average of US$2.5 million at an exchange rate of GHS 11.75.
Looking ahead, the local unit’s prospects largely hinge on the influx of Hard Currency (HC) from various sources, including the annual cocoa loan syndication, funds from the International Monetary Fund (IMF), and contributions from the World Bank. It is anticipated that regulatory authorities will maintain their vigilant oversight and enhanced surveillance operations to guide market conduct in the weeks to come.
The Cedi remains under pressure due to robust corporate FX demand and limited supply. The Bank of Ghana is diligently intervening to restore market stability, and the Cedi’s fortunes are expected to improve with the anticipated inflow of hard currency from multiple sources. The commitment to regulatory oversight remains a critical aspect in managing the currency’s trajectory.
