The Ghana cedi is expected to trade between GH¢10.95 and GH¢11.76 to the US dollar by the end of September, with the Bank of Ghana likely to increase its foreign exchange support as seasonal import demand begins to build ahead of the festive season.
The forecast comes after a mixed performance by the local currency in August. Although the cedi recorded strong gains in the second week of the month, it later surrendered part of those gains and ended August trading around the GH¢11.00 level against the dollar.
The cedi strengthened to around GH¢10.95 to the dollar during the middle of August before weakening again to close the month at GH¢11.25 on the interbank market.
Despite the late-month correction, the cedi’s overall year-to-date loss narrowed significantly. By the last trading day of August, the currency had depreciated by an average of 6.89 percent since the start of the year, compared with a 10.04 percent loss at the end of July.
Over the two-week review period, however, the cedi came under renewed pressure on the interbank market, depreciating by 2.67 percent against the US dollar, 2.55 percent against the pound sterling and 2.72 percent against the euro.
It closed at GH¢11.25 to the dollar, GH¢15.23 to the pound and GH¢13.04 to the euro.
The retail market, however, told a slightly different story. The cedi appreciated by 4.33 percent against the dollar and 0.47 percent against the pound, ending the period at GH¢11.55 and GH¢15.88 respectively.
Against the euro, the local currency weakened marginally by 0.18 percent to close at GH¢13.68.
Analysts have attributed the relative stability of the foreign exchange market in August partly to the Bank of Ghana’s continued interventions.
The central bank is estimated to have sold about US$912 million in the foreign exchange market during the month, representing 91.2 percent of its planned US$1 billion intervention.
The support helped ease demand pressures, curb speculative activity and slow the cedi’s year-to-date depreciation.
Looking ahead, analysts at Databank expect the Bank of Ghana to modestly increase its foreign exchange support beyond US$1 billion as demand for dollars rises to finance imports ahead of the festive season.
That intervention could prove crucial in determining how the cedi performs in September and whether it remains closer to the stronger end of the projected GH¢10.95 to GH¢11.76 trading range.
