The Ghana cedi has lost around 3.56% of its value against the US dollar since the beginning of 2024. Despite better market liquidity, the local currency fell in value last week. This followed robust business demand and higher-than-expected January 2024 inflation. Despite reduced depreciation pressures and increased liquidity, the local currency lost 0.40% in value against the US dollar last week.
It also fell 0.16% and 0.19% against the pound and euro on the retail market, respectively. After falling in the first two trading sessions, the Bank of Ghana’s $15 million spot market provision and $20 million auctioned to the Bulk Oil Distribution Companies helped keep the cedi stable at GH¢12.58 to the dollar until the week’s end. On February 20, 2024, the local currency was trading at GH¢12.75 (selling) to the dollar.
The US inflation rate in January 2024 fell to 3.1% from 3.4% in December 2023. Analysts predict that this will increase market uncertainty and strengthen the dollar, as the market expects the Federal Reserve to keep the policy rate at its next meeting. They also expect that this will put downward pressure on developing market currencies, especially the cedi, in the near future. However, based on market action this week, they expect that limited market activity and likely BoG foreign exchange market intervention will help alleviate cedi depreciation pressures.
