Despite uptick in demand for dollars, the Ghana cedi remains very well on course to record a marginal appreciation against the dollar in the first half of this year.

Recent forex auctioning by the Bank of Ghana indicates a surge in demand for the American currency. But analysts believe the Bank of Ghana has sufficient forex reserves to deal with any increase in the demand for the dollar.

Currency Analyst and Fund Manager at IC Securities, Derrick Mensah tells Joy Business the cedi has benefited from a healthy reserve position of the Bank of Ghana, coupled with other factors.

“Our view is that the cedi is likely to hold steady going forward mainly because of the dollar inflows that we’ve received, following the earlier Eurobond auction. I believe that the Central Bank currently has a healthy position of reserves in foreign currency. The last time I checked I think it was 4 months of import cover”, he said.

“We believe that going forward there should be enough reserves to support the currency even with the opening up of the economy”, he added.

On whether, the local currency is on its way to replicate last year’s performance in 2021, Mr. Mensah pointed out that “it’s very difficult to say, it’s like looking through a crystal ball. Our view is generally that the currency in the immediate term, over the next few months, over the next quarter is likely to remain stable”.

“Yes, we will see some pressure, coming through giving the opening up of the economy, but we think the Central Bank is in a good position to defend the currency.

Currency Analyst and Senior Economic Analyst at Databank Securities also said the cedi remains very well anchored despite the uptick in forex demand, adding the market remains calm and investors are not fretting over the uptick in demand.

“We typically see this increase on the spot market arising from unmet demand at the bi-weekly FX forward auctions. But this tends to diminish with time because there’s sufficient amount of supply coming through from the Bank of Ghana on the spot market in addition to inflows from offshore investors”, he noted.

Presently, the cedi has appreciated slight against the dollar, trading around GH¢5.81 to the dollar.

Cedi ends first quarter as Africa's best performing currency

The Ghana cedi ended the first quarter of this year with a year-to-date appreciation of 0.6% against the dollar, similar to last year’s performance.

The strong performance made it the best currency among 15 important African countries, including the Egyptian pound, Nigerian naira and South African rand.

The Ghanaian local currency has benefited from growth in diversified exports, particularly gold and cocoa; the impact of covid-19 which has slowed down global economies and the Bank of Ghana’s forex interventions.