Source: Charles Nixon Yeboah 16 August 2021
The Ghana cedi is now trading above 6 cedis as demand for the American ‘greenback’ continues to surge.
Data from Reuters and Databank Research indicates that a dollar is going for more than ¢6.
Also, the forex bureaux are selling the local currency between ¢6.1 and ¢6.14 to a dollar.
The cedi has so far depreciated by about 1.07% to the US dollar on the interbank market and 2.71% on the retail market.
Research and Currency Analyst at Databank Research, Courage Boti, said despite the recent demand for dollars by corporate institutions and some retail consumers, putting pressure on the cedi, there is no cause for alarm.
According to him, the local currency will be bolstered by the expected $1 billion support from the International Monetary Fund that is supporting individual economies to recover from Covid-19 as well as the COCOBOD syndication, expected next month or October 2021.
“When you look at the cedi’s performance so far, I think we close last week – the indicative retail market – at ¢6.09 to a dollar which is translated to 2.71% depreciation. On the interbank market, it closed at ¢5.82, which is 1.06% depreciation. If you looked at it within the context of the last seven to eight weeks, yes there is some decline which is concerning.”
“But if you look at it from the historical performance, saying, for the last 5 year, 6 years, it’s actually an impressive performance. To put in context, I think in 2020 around August 13, it was a 2.9% depreciation on the interbank market to the US dollar. If you look at it during the same period in 2019, it was 8.43% depreciation on the interbank market, in 2018 it was 6.9% depreciation on the interbank market”, he added.
Mr. Boti further said there is more relatively stable performance of the cedi, relative to the past years, adding “yes the trend over the last six, seven weeks is concerning or can be of concern but if you put it within that context, I think it’s really a very steady and stable performance of the cedi so far.”
What accounted for this performance?
The Currency Analyst said “I think we started the year on a good note, we started the year where offshore investors were bullish on emerging market assets. We saw a lot of inflows from portfolio investors into Ghana’s bonds and all of that. That improved liquidity on the market”.
“And the Bank of Ghana in the first quarter actually scaled up the bi-weekly FX [foreign exchange] auctioning, issuing over $40 million, plus the daily interbank surveillance. You add to the fact that offshore investors were coming in so much, and that actually boosted the market, and we think that the cedi appreciated during the first quarter and part of the second quarter”, he emphasised.
However, he pointed out that the sentiments on the foreign exchange market changed when the second quarter started because US Treasury and other markets in advanced economies started rising, adding “we saw that sentiments started changing, when treasury yields in the US and some of the advanced economies started rising. our reserves is actually strong to curtail any severe pressures”.