The Ghana cedi gained grounds against the US dollar last week after going through some difficult time the prior week.

The local unit appreciated by 1.38% on the retail market against the American greenback last week, reversing the year-to-date loss. The year-to-date depreciation thus narrowed to 2.05%.

It also increased in value against the euro by 0.61%.

Conversely, the cedi depreciated by 0.26% against the pound (one pound/GH¢19.45).

The local currency started this week going for GH¢16.10.

Analysts attributed the relatively stable performance of the cedi against the dollar and euro to a reduction in speculative demand, as the Bank of Ghana announced a US$170 million 7-day forward auction to meet demand.

The Bank of Ghana revealed in its Monetary Policy Report that the cedi came under intermittent pressures during the first three quarters of 2024, but regained some value in the last quarter of the year.

It pointed out that increased demand for foreign exchange to support energy related payments, uncertainty around timelines on conclusion of the external bond restructuring, uncertainties around COCOBOD financing arrangements, and election-related jitters exerted pressure on the currency. By the end of the third quarter, the currency had depreciated by 24.8% on a year-on-year basis.

Meanwhile, Ghana’s Real Effective Exchange Rate (REER) index ended 2024 at 135.3, down from a peak of 156.2 in October 2024, while the US dollar Index rose to 108.5.

Databank Research expects the combination of higher import costs, and a stronger US dollar to put pressure on the cedi in the coming weeks, particularly as demand in the manufacturing and energy sectors rise alongside speculation of a potential decline in crude oil prices