The cedi’s rate of appreciation against the US dollar slowed down as it recorded a 0.1 percentage points decline for May.
The local currency for the month of May this year appreciated by some 0.4 percentage points against the American dollar.
While this is good news for the Ghanaian economy given that the appreciation of the cedi indicates a weakening of the dollar and a strengthening cedi, the 0.4 percent appreciation rate recorded in May follows a higher appreciation rate of 0.5 percent in the previous month, indicating a slowing down in the rate of appreciation against the greenbuck.
Against the British Pounds, the cedi in April depreciated by 0.6 percentage points, depreciating further by 3.3 percent in May 2021.
Compared to its performance against the British pounds and the dollar, the cedi’s performance against the euro was better as it appreciated against the Euro by 2.4 percent and 1.0 percent in April and May respectively.
Currency analysts expect the local currency to replicate its sterling performance against the US dollar in 2020 this year.
The expectation comes on the back of strong forex reserves of the Central Bank coupled with the weekly forex auction of dollars by the Central Bank to ensure sufficient supply of dollars to businesses and a further weakening of the US dollar.
The cedi last year, cumulatively depreciated against the dollar by 3.9 percentage points making it one of the best-performing currencies in Africa.
Its impressive 3.9 percent depreciation rate for 2020 was also the cedi’s best performance since 2017 when it depreciated by 4.9 percent.
Senior economist with Databank Research, Courage Martey, has expressed the view that despite some expected intermittent depreciation of the cedi in the course of the year, the cedi is expected to generally remain stable throughout the year.
“There is a significant support base for the cedi to be able to sustain relative stability throughout the year as it did in 2020. The recent $3 billion Eurobond issuance provides an almost immediate support to the reserves, strengthens the Bank of Ghana’s (BoG) intervention measures, and bodes well for the local currency as far as 2021 is concerned,” stated Mr Courage in an interview earlier this year.
“We are also aware that there could be intermittent depreciation risks even from the recovery in economic activity as imports demand goes up, but we are very bullish that the BoG will have the resources to be able to avert significant volatility on the market. So generally the outlook is positive on the back of the performance it had in Q1 2021 (1.7 percent appreciation),” he added.
On the back of the anticipated performance of the cedi against the dollar this year, investment firm Databank, has forecasted an average end-year depreciation of Ghs 6.18 pesewas of the local currency to the dollar.
A group known as the Centre for Finance and Inequality Studies, has also projected an average end-year depreciation of Ghs 6.25 pesewas to the dollar for 2021.