The cedi recorded a gain against the US dollar by the close of trading on Thursday, August 15, after a losing streak. The cedi, which had depreciated by around 23% against the dollar this year—making it the fifth-worst performing currency tracked by Bloomberg—managed to recoup some of its losses. After trading at GH¢15.70/ GH¢15.80 on August 1, the cedi remained relatively stable until Thursday, when it closed at GH¢15.60/ GH¢15.67 on the interbank market.
Currency trader Kodzo Dziwornu Letsa told The High Street Journal that the cedi’s gain against the dollar was due to an increased supply of the US currency. “With liquidity improving at the interbank FX market and the demand slowing down, we are seeing the pair drop in pricing,” he said just before 10 a.m. on Thursday, when the dollar was trading around GH¢15.60/ GH¢15.70. By the end of the trading day, the cedi had gained further, with offers at GH¢15.67, while bids remained unchanged. “The market was flooded with dollars,” Mr. Letsa noted after trading closed.
The High Street Journal sources revealed that there were offers as large as $6 million from a single trader, with other offers ranging between $1 million and $4 million. Much of the dollar supply came from banks and brokers. It remains unclear what triggered the sudden influx of US currency, but sources indicated that it seemed “almost as if banks are dumping the greenback.”
The high volumes of trade led to offers as low as GH¢15.46 to the dollar. Analysts speaking to The High Street Journal earlier pointed to positive sentiments surrounding the Mid-Year Budget Review, which suggested that the government was spending within limits, and recent Bank of Ghana regulations on forex trading at Forex Bureaux as possible reasons for the reduced demand for the dollar.
Meanwhile, market operators are speculating that the Bank of Ghana may further intervene by injecting additional dollars into the market. This anticipation might have prompted some traders to sell their dollars in expectation of a further decline in its value should the Central Bank intervene heavily. Sources suggest that apart from the regular supply of dollars to Bulk Oil Distributors, the regulator has asked corporate institutions seeking forex to specify their needs, fueling speculation that a significant intervention might be imminent—a move that has previously disrupted the market.
However, a potential challenge is the inadequate dollar inflow, which may limit the Central Bank’s ability to sustain its interventions. As of the end of June, Ghana’s reserves stood at $6.9 billion, enough to cover 3.1 months of imports, up from $5.3 billion a year earlier. The 3.1-month import cover is just above the International Monetary Fund’s required minimum of three months.
The next inflow, which could have provided some relief—the cocoa syndicated loan—is expected to be delayed, as it has been for the past two years. Sources indicate that international lenders are uncertain whether the Ghana Cocoa Board has the capacity to repay the $1.5 billion loan due to low cocoa production, estimated at about 460,000 tons, and a default on cocoa bills.
