Cedi expected to maintain modest stability amid multiple influencing factors
The Ghanaian cedi is anticipated to maintain relative stability against major trading partners, owing to a combination of factors. These include recent coupon payments for new bonds, decreased import demands, and the allocation of foreign exchange (FX) to oil players, which serves to offset growing demands from corporate entities.
Despite experiencing a depreciation of approximately 22 percent against the U.S. dollar since the start of the year, the cedi has managed to stay within a fairly steady range, fluctuating between 11.01 and 11.45 against the dollar over recent weeks.
Databank Research pointed out a recent surge in corporate demand for foreign exchange, which temporarily strained market liquidity. Nonetheless, the cedi saw some strengthening, partly attributed to the Federal Reserve’s announcement of a cautious policy rate hike, which helped ease market uncertainties.
Market observers, such as GCB Capital, acknowledge potential risks to the cedi’s stability, including the ongoing strength of the U.S. dollar and tightening FX liquidity conditions. However, they remain optimistic about fiscal improvements and the positive impact of recent coupon payments on market sentiment.
The recent settlement of the GH¢2.4 billion first coupon payment for new bonds under the Domestic Debt Exchange Programme by the Treasury has alleviated concerns about its ability to meet obligations. A significant portion of this coupon payment, GH¢5.37 million, was allocated to individual bondholders.
GCB Capital, while expressing caution about the cedi’s vulnerability to short-term shocks in tight FX liquidity conditions, anticipates some support from the BDCs FX auction in the near term.
Constant Capital analysts note that the cedi appears to benefit from reduced imports and lower FX demand pressure. A significant trade surplus has bolstered the nation’s current account, reaching a surplus of US$849 million in the first half of the year.
This surplus, equivalent to 1.1 percent of GDP, includes a year-on-year import decline of 13.5 percent compared to a deficit of 1.5 percent of GDP around the same time last year. Analysts at Constant Capital anticipate expected FX inflows toward year-end, including a US$600 million International Monetary Fund (IMF) disbursement and the cocoa syndicated facility.
This sentiment is echoed by AZA Finance, which predicts relative stability for the cedi, citing a consistent flow of forex to accommodate retail needs.
The Ghanaian cedi is expected to sustain a degree of stability against major trading partners, supported by a combination of factors and cautious optimism within the market.
with files from thebftonline.com
