The Ghana cedi is expected to recover some of its losses in the coming days after showing improved performance against the US dollar last week.
The local currency appreciated by 0.10% against the US dollar, ending the week at GH¢15.69. This positive trend suggests potential gains ahead.
The cedi maintained its position against the dollar, aided by soft US inflation data that increased expectations for a Federal Reserve interest rate cut in September 2024.
This led to a decline in the US dollar against a range of other currencies.
However, analysts predict that the cedi may trade within a narrow range against the dollar as renewed corporate demand pressures emerge in the market.
In contrast, the cedi depreciated by 0.30% and 0.63% week-on-week against the euro and the pound, respectively, after data revealed faster-than-expected growth in the UK economy for May 2024.
This news reduced the likelihood of an August 2024 UK interest rate cut, leading to a strengthening of the pound.
Currently, the cedi is trading at GH¢15.65 against the US dollar. Since January 1, 2024, it has depreciated by 20% against the American greenback.
Cedi to recoup some losses
Meanwhile, Fitch Solutions has projected that the cedi will recover 9.0% of its losses against the dollar, reducing its year-to-date depreciation to approximately 10%.
“We project the cedi to appreciate by 9.0% to CCEPTED GH¢13.5/US dollar by year-end, from the July 9 spot of 14.7/US dollar. On July 8 [2024], Ghana reached an agreement with international bondholders to restructure US$13 billion worth of external debt, a process that should be concluded by the end of September. We believe that this will improve investor sentiment towards Ghana, improve capital inflows and provide appreciatory pressure to the unit”.
“Moreover, the start of a monetary easing cycle in the US in September will likely put some pressure on the dollar and improve investor appetite for higher-yielding emerging market assets, providing tailwinds to the cedi”, it concluded.