After a challenging period, the Ghana cedi showed signs of improvement last week, gaining ground against major currencies, including the US dollar. The local currency appreciated by 1.38% on the retail market, reversing its earlier year-to-date loss and reducing the depreciation to 2.05% as of last week. The cedi also rose by 0.61% against the euro.
However, the cedi faced a slight setback against the British pound, depreciating by 0.26%, with one pound valued at GH¢19.45. The local currency began this week at GH¢16.10 against the US dollar.
Analysts have pointed to a reduction in speculative demand as a major factor behind the cedi’s relatively stable performance against the dollar and euro. The Bank of Ghana’s announcement of a US$170 million 7-day forward auction to meet demand is seen as a positive move for stabilizing the currency.
The Bank of Ghana also noted in its Monetary Policy Report that while the cedi experienced intermittent pressure during the first three quarters of 2024, it regained some value in the last quarter of the year. Key factors influencing the cedi’s volatility included an increase in demand for foreign exchange for energy-related payments, uncertainty surrounding the external bond restructuring process, concerns over COCOBOD financing arrangements, and election-related uncertainties. By the end of the third quarter of 2024, the cedi had depreciated by 24.8% year-on-year.
Looking at the broader exchange market, Ghana’s Real Effective Exchange Rate (REER) index closed 2024 at 135.3, a drop from its peak of 156.2 in October 2024. Meanwhile, the US Dollar Index rose to 108.5, reflecting a global strengthening of the dollar.
This uptick in the cedi’s value offers a glimmer of hope for Ghana’s economic stability and could provide relief to local businesses and importers who rely on the exchange market. However, with ongoing pressures from external factors, the future of the cedi remains uncertain.
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