February 10, 2025

The Ghanaian cedi appreciated by 1.44% against the US dollar last week, with the exchange rate settling at GH¢15.75 per dollar

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cedi-to-dollar

The Ghanaian cedi demonstrated significant improvement across major currencies last week, driven by a reduction in foreign exchange demand as the holiday season drew to a close. The cedi appreciated by 1.44% week-on-week against the US dollar, trading at GH¢15.58/$ by the end of the week, compared to GH¢15.75/$ at the start. This marks a positive shift in the local currency’s performance, which had been under pressure in recent months.

One of the key factors contributing to the cedi’s appreciation was the intervention by the Bank of Ghana. The central bank sold US$20 million to Bulk Oil Distributors at a forward rate of GH¢14.7690/$, slightly lower than the previous auction rate of GH¢14.8133/$. This intervention helped alleviate some of the upward pressure on the dollar, signaling a reduction in demand for foreign exchange in the retail market. Despite the Bank of Ghana’s active participation in the forex market, the cedi’s gains were substantial, reflecting a 1.44% weekly improvement against the greenback.

In addition to the gains made against the US dollar, the cedi also strengthened against other major currencies. The local currency appreciated by 2.86% against the British pound and 3.70% against the euro. These movements highlight the broader strength of the cedi across different foreign exchange markets, underscoring the stabilization of the local currency.

However, despite these short-term improvements, the cedi has continued to face challenges throughout 2024. Year-to-date, the cedi has depreciated by approximately 21.58% against the US dollar, illustrating the ongoing volatility in the currency market. At the start of the week, one US dollar was trading at GH¢15.75, reflecting the continued pressures on the cedi due to broader economic factors, including inflationary trends and demand for foreign currencies.

On the interbank market, the Bank of Ghana quoted a rate of GH¢14.71 to the US dollar. This rate is a critical indicator for financial institutions and businesses engaged in foreign exchange transactions, and it underscores the central bank’s role in managing currency fluctuations through its monetary policy interventions. The Bank of Ghana’s continued presence in the market through regular forex auctions is seen as a key mechanism for supporting the cedi and mitigating excessive volatility.

Looking forward, the Bank of Ghana has announced its foreign exchange auction calendar for the first quarter of 2025. This schedule confirms that the central bank will continue to allocate US$20 million per auction for the first six sales, which will help ensure a consistent supply of foreign exchange. This regular allocation is expected to provide stability to the market, helping to meet demand for foreign currency, particularly in the wake of seasonal fluctuations.

With demand pressures easing and seasonal liquidity improving, analysts are optimistic that the cedi will continue to see support in the coming weeks. The ongoing interventions from the Bank of Ghana, combined with the easing of holiday-driven forex demand, create a favorable environment for the local currency to strengthen further. In addition, the anticipated total auction amount of US$120 million for the first quarter of 2025 provides a cushion for the cedi, ensuring that there is sufficient liquidity to support its performance.

As a result, the cedi is expected to maintain its strengthening trend in the short term, provided that the current conditions persist. The central bank’s proactive measures to stabilize the currency, along with a reduction in demand for foreign exchange, are likely to keep the local unit supported in the face of global and domestic economic challenges.

While the cedi has faced significant depreciation in 2024, last week’s performance signals a positive shift. The currency’s recent appreciation against the US dollar, pound, and euro, along with the Bank of Ghana’s continued efforts to stabilize the market, suggests that the cedi could continue its strengthening trajectory in the near future.

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