Cedi to find cushion on expected dollar inflows, but demand pressures persist

The cedi is expected to find a cushion on the back of expected foreign exchange inflows from the $1.3 billion cocoa syndicated loan.

The dollar inflows is expected by October 2022.

According to the Weekly Currency Report by Databank Research, the European Central Bank hike of deposit rate by 75 basis points and an impending US Fed policy rate hike represent depreciatory pressure points for the local unit.

“In the coming weeks, we expect the cedi to find a cushion on the back of expected FX [foreign exchange] inflows from the $1.3 billion cocoa syndicated loan. We reckon, however, that the ECB hike of deposit rate by 75bps and an impending US Fed policy rate hike represent depreciatory pressure points for the local unit”.

Cedi slid slightly against dollar last week

The cedi slid against the dollar last week after a short-lived rally the previous week.

Despite the improved dollar reserves, sustained demand for the dollar weighed on the cedi, subduing its rally in the first week of September 2022.

Last week, the Bank of Ghana allotted $25 million across the 7-day to 75-day tenors against total bids of $107.75 million.

The resulting bid-to-cover ratio of 4.31x vs 4.38x in the previous auction shows a marginal relaxation of demand pressures, although the wide demand supply disparity persists.

The cedi shed 0.28% week-on-week (w/w) against the greenback on the Bank of Ghana reference rate market, lost 0.41% w/w vs euro, and slid 0.55% w/w against pond.

However, on the forex bureau, the local currency lost 1.74% w/w against the greenback, with a bid/offer quote of 9.93/10.20, deepening its year-to-date loss to 35.52% against the US dollar.

Source: Joy Business