The International Monetary Fund (IMF) and World Bank inflows are anticipated to give the cedi some relief as the nation prepares for the customary spike in demand for foreign currency during the holiday season. Concerns have been expressed on the possible impact of the third-quarter demand season, which is less than six weeks away, on the local unit, which has fluctuated against its main trading partners. Although the central bank’s action and other factors have contributed to the recent relative stability of the cedi, analysts caution that the currency is still susceptible to shocks. There are a lot of hazards involved with the impending elections and the corresponding rise in government spending.
In its comments on the 2024 mid-year budget, Deloitte stated that this and other inflows anticipated from the World Bank Development Policy Operation (DPO) would help absorb some of the FX shocks related to the December festivities. As of the end of June 2024, the cedi lost value relative to the dollar, pound, and euro by 18.6%, 17.9%, and 16%, respectively, according to government figures. According to Deloitte, the devaluation of the cedi was mostly caused by the dollar’s appreciation versus major trading currencies, businesses’ increasing demand for foreign exchange, coupon payments on bonds issued in February 2024, and speculative activities.
Even still, business demand for dollars—especially in the lead-up to the holiday season—remains difficult to meet, even if the cedi was mostly stable last week thanks to US$10 million in spot market support from the Bank of Ghana. But towards the close of the week’s trade, the cedi was under pressure due to ongoing corporate demand. Consequently, throughout the course of the week, the local currency lost 0.47 percent of its value relative to the US dollar, closing trades at GH¢15.95 to US$1 on the retail market.
SOURCE https://dew360.net
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