Cedi Weakens on Interbank Market as Analysts Warn of Rising Dollar Pressures

The Ghanaian cedi weakened on the interbank market last week, with market analysts warning that near-term pressures against the U.S. dollar are likely to intensify. According to Databank Research, easing global tensions and a stabilising CBOE Volatility Index (VIX) could divert investor flows from gold into U.S. dollar assets, a trend that may increase pressure on Ghana’s local currency.

Gold, one of Ghana’s largest foreign exchange earners, plays a crucial role in supporting the cedi. Any decline in gold’s appeal to investors often weighs on the country’s currency performance. This dynamic contributed to last week’s depreciation of the cedi across major trading pairs on the interbank market.

The cedi slid by 1.41% against the U.S. dollar, 2.82% against the euro, and 3.73% against the British pound, closing at GHS10.65/USD, GHS12.47/EUR, and GHS14.45/GBP over the two-week trading period. In the retail market, however, the currency showed mixed results. The USD/GHS pair traded between GHS11.50 and GHS11.90, with the cedi managing a modest 1.06% gain.

Against the pound, the local unit appreciated by 0.64% to close at GHS15.65/GBP, but it slipped 0.73% versus the euro to end at GHS13.70/EUR. Databank noted that the cedi exhibited “modest stability” on the interbank market, firming slightly from GHS10.80/USD to GHS10.65/USD, despite renewed corporate demand and limited foreign exchange inflows.

Analysts say the outlook for the cedi remains cautious. Persistent demand pressures in the retail market, coupled with expectations of stronger U.S. dollar inflows, may weaken the currency further. If global capital flows continue to tilt towards the dollar over commodities like gold, Ghana’s cedi could face additional downside risks in the weeks ahead.

Source: Citi newsroom