Central Bank intervention ineffective as Cedi weakens 1.37% week-on-week
The cedi’s recent depreciation against the US dollar and other major currencies has prompted deep concerns within the financial markets, raising alarms over the currency’s stability amidst escalating pressures.
Since the dawn of the year, the Ghanaian cedi has witnessed a disheartening erosion in value, amounting to a staggering 4.44% decline against the greenback. Last week alone, the local currency faltered by 1.37% in its exchange rate against the American dollar, succumbing to formidable corporate demand and relentless cedi-funded foreign exchange pressures.
Efforts by the Central Bank to buoy the cedi’s performance proved to be insufficient, as its intervention in the spot market, amounting to the sale of $18.5 million, failed to stem the tide of depreciation. The cedi concluded the week at a mid-rate of GH¢12.75 to the dollar, while also shedding 1.10% and 1.47% of its value against the pound and the euro, respectively, on the retail market.
The government’s discharge of coupon obligations on newly issued bonds injected a substantial GH¢5.1 billion into the investor pool, yet the move did little to assuage the persistent pressures on the cedi. This trend persisted into the beginning of the week, with the local currency trading at GH12.85 against the dollar on Monday, February 26, 2024.
Analysts attribute the cedi’s decline to a confluence of factors, including heightened corporate demand, domestic financial pressures, and mounting concerns over inflationary spikes. Improved liquidity in the local unit’s market has facilitated cedi funding towards foreign exchange demand, further exacerbating its depreciation against major trading currencies.
In January 2024, the Bank of Ghana reported a 0.7% loss in the cedi’s value against the dollar, marking a less severe decline compared to the same period in the previous year. However, February 2024 has witnessed a deepening of the currency’s depreciation, casting shadows over its near-term trajectory.
As the week unfolds, analysts anticipate a continuation of the prevailing narrative, with the cedi likely to face sustained pressure across major trading pairs. Amidst escalating uncertainties and market dynamics, stakeholders remain vigilant, closely monitoring developments in the currency markets
