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The Dollar Resumes Its Rise After Brief Decline

The cedi has begun depreciating again after gaining against the dollar despite the enforcement measures rolled out by the Bank of Ghana

After a brief period of losing ground to the cedi, the dollar has resumed its upward trajectory, despite several stringent measures undertaken by the Bank of Ghana (BoG).

On Tuesday, June 4, the dollar experienced a sudden drop in its rate on both the interbank and forex bureaux markets. This decline was attributed to the Central Bank’s enforcement measures, including a crackdown on illegal operators, which led to market inactivity due to fears of arrest. This inactivity resulted in the dollar rate decreasing for three consecutive trading days.

However, as many market watchers predicted, by Friday, June 7, the lack of dollar availability halted the cedi’s gains, as market forces regained influence. On the first trading day of this week, the dollar returned to its June 3 levels, with opening bids around GH¢15.08 and offers higher at GH¢15.20, compared to GH¢14.95 and GH¢15.05 on June 6, the last day of the cedi’s gain.

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Market analysts attribute the reversal of Cedi’s gains to reduced activity on the interbank market on June 7, primarily due to inadequate dollar supply. Analysts argue that if the Dollar supply does not improve during trading on Tuesday, June 11, the rapid rise in the dollar rate observed in May may resume.

The BoG has stated that it has sufficient dollars to meet demand but has struggled to inject adequate foreign exchange into the market. Additionally, the Central Bank’s reserves are only enough to cover three months of the country’s imports, the minimum required under the International Monetary Fund (IMF) bailout programme, making it difficult for the BoG to flood the forex market with US currency.

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The next major inflow expected is the third batch of $360 million from the IMF, anticipated by the end of June. The period between now and the end of the month will be critical, as the cedi’s fate hangs in the balance.

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