In a surprise move, the Bank of Ghana sold some dollars on the interbank market to mitigate the the rapid depreciation of the cedi.
The cedi has been losing values almost daily in the past week sparking fears of a free fall of the local currency if there is no immediate intervention. In response the Central Bank unexpectedly announced a dollar auction in 7-day forwards in an attempt to calm the market.
The demand for the dollar has short up over the past week leading to liquidity crunch. This is a usual trend in the first two months of the year and can deteriorate if not checked. Despite the intervention the cedi still lost some value trading between GH¢15.20 and GH¢15.30 levels on the interbank market on Wednesday January 23.
Market watchers are hoping that the central bank will continue to support the market in order to increase supply of the US currency to match demand and ensure some relative stability of the market. The latest move by the Central Bank might have been influenced by the Monetary Policy Committee which begun its regular meetings on Wednesday January 22 to assess the performance of the economy. Although inflationary pressures remain and the cedi is still struggling, many analysts are not expecting the Committee to increase the policy rate which currently stands at 27%, a rate many consider high and a disincentive enough for borrowing by the private sector.
The MPC expected to conclude its meetings today, the decision on the policy rate could be announced later today or on Monday.
