In a challenging start to 2024, the cedi has faced a 2.2% depreciation against the US dollar, marking a notable decline despite the gains made under the International Monetary Fund (IMF) program. The Board’s approval of the first review on January 19, 2023, seemingly failed to shield the local currency from the headwinds it has encountered in recent weeks.
The US dollar’s strength, propelled by robust economic data and the indication of a cautious approach by the Federal Reserve towards policy rate cuts, has been a key driver of the cedi’s depreciation. The US dollar index closed at 103.24, strengthening by 100 basis points.
Despite the Bank of Ghana’s intervention through a $11.6 million spot market support, the cedi concluded the week 1.60% weaker, settling at GH¢12.53/1$ on the retail market. Similar trends were observed against other major currencies, with a 1.12% and 1.11% dip against the pound and the euro, respectively, on the retail market.
Analysts, however, foresee a potential turnaround in sentiment with the expected influx of the $600 million bailout package and additional budgetary support from the World Bank. This anticipated boost in liquidity is expected to alleviate pressure on the cedi, providing relief in the foreign exchange market.
Despite persistent corporate demand, analysts express optimism that improved sentiment, driven by the cash inflow from the IMF and the World Bank, will contribute to increased supply-side intervention, acting as a buffer against further depreciation in the short term.
The cedi, for this week, has displayed a resilient start, currently trading at GH¢12.43 against one US dollar. The dynamics of these developments will be closely monitored, considering their broader implications for investor confidence and the economic stability of Ghana.