The Ghana cedi posted a strong recovery against the US dollar over the past two weeks, buoyed by robust foreign exchange interventions by the Bank of Ghana that eased market pressures and improved investor confidence.
The local currency significantly reduced its year-to-date losses, narrowing from about 11 percent to around 6 percent during the review period as increased forex liquidity supported demand in the market.
In the interbank market, the cedi appreciated by 5.66 percent against the US dollar to close at GH¢11.22. It also gained 6.76 percent against the British pound to GH¢14.83 and strengthened 6.24 percent against the euro to GH¢12.86.
The gains extended to the retail market, where the cedi appreciated by 2.07 percent against the dollar to trade at GH¢12.05. It also strengthened by 2.19 percent against the pound to GH¢16.00 and by 2.25 percent against the euro to GH¢13.90.
According to Databank Research, the currency’s performance exceeded expectations following stronger-than-anticipated foreign exchange interventions by the central bank.
The research firm explained that although it had projected more modest interventions in early June followed by larger injections later in the month, the Bank of Ghana’s substantial discounted forex liquidity injections quickly eased speculative demand and triggered an average appreciation of about 6 percent.
Databank noted that previous episodes in which the central bank injected between US$1.2 billion and US$1.5 billion into the market had similarly improved exchange rate stability and reduced speculative activity.
The firm believes the cedi could strengthen further in the coming weeks, particularly as a significant portion of the Bank of Ghana’s planned US$1.2 billion forex support for June is yet to be released. Continued liquidity inflows, it said, could push the exchange rate toward GH¢10.90 to the dollar.
The cedi opened the new trading week at about GH¢12.10 to the US dollar in the retail market, while the interbank rate remained at GH¢11.22. The currency has now recorded a year-to-date gain of approximately 0.62 percent against the dollar.
Source: businesspostonline
