Ghana Cedi Records 1.86% Depreciation in July as Dollar Demand Rises

• The Ghana cedi has depreciated by 1.86% against the US dollar in July, reversing gains made in June
• Increased dollar demand from businesses stocking up for the Christmas season is adding to existing pressure on the cedi
• The Bank of Ghana expects the cedi to remain relatively stable and plans to supply about US$500 million to the market in September

The Ghana cedi has recorded its second monthly depreciation since May, sliding 1.86% against the US dollar in July as foreign exchange demand continues to build across the market.

The latest figures from commercial bank price quotes and market data confirm the reversal after the cedi appreciated by 3.30% against the dollar in June.

That earlier gain was supported by a significant injection of $2.01 billion into the foreign exchange market by the Bank of Ghana to stabilise the currency and meet rising demand.

The weakness has persisted into the current month. Market data show the cedi has recorded week-to-date and month-to-date depreciations of 0.52% and 1.66%, respectively, bringing its year-to-date depreciation to 8.06%.

Read also

Dangote launches Africa's biggest share sale, offers stake in Lagos oil refinery

A primary driver of the latest pressure is heightened dollar demand from businesses financing energy imports, a factor compounded by crude oil prices.

Market watchers have told Joy News that additional demand is also coming from importers who are building stock ahead of the December festive season, and that this pressure could remain elevated in the weeks ahead.

Bank of Ghana Forecasts Stability

Despite the currency's recent performance, the Bank of Ghana has characterised the latest movements as normal market developments. In its July Monetary Policy Report, the central bank acknowledged that foreign exchange demand tied to the Christmas season could generate further pressure but said it was confident in its capacity to manage conditions.

"Over the medium term, the Ghana cedi is expected to remain relatively stable," the Bank stated in the report.

It added that both foreign exchange interventions and remittance flows would play a role in easing pressure on the currency. "FX intermediation is expected to moderate the pressures on the cedi, along with remittance flows," the Bank said.

Read also

Ghana's £10million tourism shirt deal with Sunderland in limbo

As part of its planned support, the central bank is expected to supply approximately US$500 million to the market in September through its foreign exchange intermediation programme.

The Ghana Gold Board is also set to contribute, targeting US$1.4 billion in foreign exchange receipts during the month.

Of that total, US$700 million is expected to be made available to commercial banks through spot sales and funded forward arrangements, while the remaining US$700 million will go to the Bank of Ghana for reserve accumulation under the Ghana Accelerated National Reserve Accumulation Policy (GANRAP).

The central bank has further signalled its readiness to intervene directly in the market when necessary to preserve orderly trading conditions, while maintaining a flexible exchange rate policy.

Source: YEN.com.gh