Cedi Edges Higher as Dollar Weakness, Central Bank Support Lift Sentiment

The Ghanaian cedi has posted modest gains over the past two weeks, buoyed by improved external conditions and renewed investor sentiment.

The local currency faced mild demand-driven pressure at the start of the period, in line with market expectations. However, it rebounded in the second week, supported by a broad-based “sell America” sentiment that weakened the US dollar and provided relief to emerging and frontier market currencies.

On the interbank market, the cedi appreciated by 0.09% against the US dollar, 0.86% against the pound sterling, and 1.16% against the euro. It closed at mid-rates of GH¢10.97 to the dollar, GH¢14.81 to the pound and GH¢12.93 to the euro.

The gains were also reflected in the retail market. The cedi strengthened by 0.6% against the dollar, 1.29% against the pound, and 1.11% against the euro, settling at mid-rates of GH¢11.63 to the dollar, GH¢15.55 to the pound and GH¢13.50 to the euro.

According to Databank Research, the cedi’s recent appreciation aligns with gains recorded across other major Sub-Saharan African currencies, underscoring the impact of sustained US dollar weakness.

The research firm expects the current tailwinds to support further strengthening of the cedi in the near term, as expectations of continued softness in the US dollar temper demand for the greenback. Market sentiment is also being shaped by heightened geopolitical risks, including concerns over a potential confrontation involving Iran.

Additional support is expected from targeted foreign exchange interventions by the Bank of Ghana. The central bank is gradually deploying a US$1 billion facility to meet market demand and stabilise the currency.

Analysts project the cedi could extend its gains to an interbank mid-rate range of GH¢10.85 to GH¢10.95 per dollar over the next fortnight. Retail rates are forecast to hover between GH¢11.55 and GH¢11.60 per dollar, with the possibility of tighter spreads should foreign inflows accelerate.

Despite the recent rally, the cedi opened this week trading around GH¢11.70 to the dollar in the retail market.

So far this year, the currency has gained 4.95% against the US dollar, reflecting a gradual but steady recovery.