By: Benjamin Nii Nai Anyetei
The Ghana cedi is expected to remain relatively stable against the US dollar through September, with analysts projecting the currency to trade within a range of GH¢10.95 to GH¢11.76 to the dollar as the Bank of Ghana is expected to increase its foreign exchange support ahead of the festive season.
The outlook follows a mixed performance by the cedi in August, when the currency remained largely anchored around the GH¢11.00 level despite losing some of the gains recorded earlier in the month.
The cedi had strengthened significantly in the second week of August, with the dollar trading at about GH¢10.95.
However, by the close of the month, the local currency had weakened to GH¢11.25 to the dollar, GH¢15.23 to the pound sterling and GH¢13.04 to the euro on the interbank market.
Over the two-week review period, the cedi depreciated by 2.67 per cent against the dollar, 2.55 per cent against the pound and 2.72 per cent against the euro.
Despite the latest depreciation, the currency’s year-to-date loss improved to 6.89 per cent at the end of August, compared with 10.04 per cent at the end of July.
BoG intervention supports cedi
Analysts attributed much of the relative stability in the foreign exchange market to interventions by the Bank of Ghana.
The central bank is estimated to have sold about US$912 million in August, representing 91.2 per cent of its planned US$1 billion foreign exchange intervention.
The intervention helped ease pressure on the cedi, limit speculative positioning and reduce the currency’s cumulative depreciation.
On the retail market, the cedi recorded stronger performance against the dollar and pound.
It appreciated by 4.33 per cent against the dollar and 0.47 per cent against the pound, closing at GH¢11.55 and GH¢15.88 respectively.
Against the euro, however, the cedi weakened marginally by 0.18 per cent to close at GH¢13.68.
September outlook
Looking ahead, analysts at Databank expect the Bank of Ghana to modestly increase its foreign exchange support beyond US$1 billion as seasonal import demand rises ahead of the festive period.
The level of central bank intervention is therefore expected to remain a key factor in determining the cedi’s performance in September.
Analysts believe stronger foreign exchange support could help keep the currency closer to the lower end of the projected GH¢10.95 to GH¢11.76 range.
However, increased demand for foreign currency from importers and other market participants could place renewed pressure on the cedi as the year-end period approaches.
The September outlook consequently points to relative stability rather than a major appreciation of the cedi, with central bank interventions and seasonal demand likely to determine the direction of the currency.
