The Ghana cedi is expected to face further depreciation against major trading currencies this week due to persistent corporate demand, as noted by currency analysts and traders who requested anonymity.
They attribute the cedi’s weakened performance to both internal and external factors, including the strengthening US dollar against Emerging Markets currencies.
April 2024 witnessed a slight decrease in inflation to 25% year-on-year from March 2024’s rate of 25.8%, largely driven by a reduction in food inflation to 26.8%.
Some analysts anticipate potential inflationary pressures, which could stimulate additional speculative demand for the US dollar, consequently weakening the cedi. The cedi has been among the worst-performing currencies globally this year.
Moreover, the upcoming announcement of April 2024 inflation by the US Federal Reserve may provide insights into the Fed’s policy rate trajectory during the June 24, 2024, meeting.
Recent US data also revealed a rise in unemployment benefit claims last week to the highest level in eight months.
These developments suggest a slowdown in consumer demand, likely attributed to a tight labor market, which could alleviate inflationary pressures, thereby easing the challenges faced by the cedi to some extent.
Cedi depreciates by 17.32% to dollar
Despite the Central Bank’s sale of an estimated $23 million on the spot market last week, the local currency experienced significant depreciation against major trading currencies.
On the retail foreign exchange market, the cedi depreciated by 2.89% week-on-week against the dollar (-17.32% year-to-date) and weakened against the Euro (-3.52% week-on-week; -15.20% year-to-date) and pound (-3.03% week-on-week; -16.63% year-to-date).
Currently, the cedi is being traded at GH¢14.90 at forex bureaus, while the Bank of Ghana quotes one US dollar to GH¢13.01.