CEDI UNDER FRESH PRESSURE AS CHRISTMAS IMPORT DEMAND DRIVES DOLLAR SURGE

The Ghana cedi has come under renewed pressure against the US dollar as rising demand for foreign exchange from businesses preparing for the Christmas season adds to demand from the energy sector.

Market data and quotations from commercial banks show the cedi depreciated by 1.86 percent against the dollar in July after appreciating by 3.30 percent in June.

The June appreciation was supported by increased foreign exchange intervention from the Bank of Ghana, which injected about 2.01 billion dollars into the market to meet demand and support currency stability.

However, pressure returned in July as demand for dollars increased, particularly for energy imports.

The weakness has continued into August, with market data showing week to date depreciation of 0.52 percent and month to date depreciation of 1.66 percent.

On a year to date basis, the cedi has depreciated by 8.06 percent against the dollar.

CHRISTMAS IMPORTS INCREASE DOLLAR DEMAND

The latest pressure is being linked partly to businesses increasing their demand for foreign currency as they prepare to import goods for the December Christmas shopping season.

Market watchers cited by JOYBUSINESS expect foreign exchange demand to remain elevated as businesses build inventories ahead of the festive period.

Demand from the energy sector has also contributed to pressure on the currency, with crude oil prices affecting the amount of foreign exchange required to finance energy imports.

The combination of seasonal import demand and energy related foreign exchange requirements could keep the cedi under pressure in the coming months.

BANK OF GHANA EXPECTS RELATIVE STABILITY

Despite the renewed depreciation, the Bank of Ghana has described recent movements as part of normal market developments and expects the currency to remain relatively stable over the medium term.

In its July Monetary Policy Report, the central bank acknowledged that increased foreign exchange demand ahead of Christmas could place pressure on the cedi.

However, it expects foreign exchange interventions and remittance inflows to help moderate the pressure.

The central bank has also indicated that it remains prepared to intervene when necessary to maintain orderly market conditions while allowing flexibility in the exchange rate.

BOG PLANS 500 MILLION DOLLAR MARKET SUPPORT

The Bank of Ghana is expected to supply approximately 500 million dollars to the foreign exchange market in September through its foreign exchange intermediation programme.

Additional support is expected from the Ghana Gold Board, which is targeting about 1.4 billion dollars in foreign exchange receipts during the month.

Of that amount, approximately 700 million dollars is expected to be made available to commercial banks through spot sales and funded forward arrangements.

The remaining 700 million dollars is expected to be provided to the Bank of Ghana for reserve accumulation under the Ghana Accelerated National Reserve Accumulation Policy.

These interventions could provide additional foreign exchange liquidity as demand from importers increases ahead of the final months of the year.

The performance of the cedi will remain closely watched as businesses prepare for the festive season and the central bank seeks to balance foreign exchange demand with its objective of maintaining stability in the currency market.