<<Print>>

The cedi has come under some pressure in the last couple of weeks, fuelling assertions that it will lose some weight against the US dollar especially as the year gradually comes to an end. Some analysts are predicting 6.0 percent depreciation by the end of the year though it declined by 2.2 percent against the US dollar in nominal terms at the end of the first six months of the year. A rush by traders to buy the US currency to import goods for resale in West Africa�s second largest economy significantly influenced the decline in the cedi for the second week running. The cedi had depreciated by 0.6 percent to GH�1.5429 against the US dollar as at the end of trading on Friday. Abdoulaye Karamoko, a currency trader at the local unit of Standard Chartered Bank Plc, told Bloomberg that �It is running to the end of year so you see the small- and medium-sized enterprises trying to buy the dollars to take stock of goods before Christmas shopping begins.� Lourens Harmse, a currency trader at Absa Capital Limited in Johannesburg, also noted that there was no selling interest, adding �There�s actually demand onshore.� Sampson Akligoh, a Senior Economic Analyst at Databank also told City & Business Guide that though there were going to be some mild pressures the Central Bank had a strong reserve to deal with the force. The cedi depreciated by 2.2 percent against the dollar in nominal terms for the first six months of 2011 compared with a marginal depreciation of 0.6 percent for the same period in 2010. In trade weighted terms, the Bank of Ghana said that a nominal effective depreciation of three percent was recorded by the end of July 2011. Some players and analysts in the financial sector had already predicted that the cedi will end the year at GH�1.55 against the dollar. Alhassan Andani, Managing Director, Stanbic Bank Ghana, commenting on the outlook of the Ghana Cedi, earlier on, said oil exports which was expected to bring in about GH�584 million and a strong economy would keep the cedi strong against the major currencies. Mr. Akligoh also indicated that the local currency could end the year 2011 within the range of GH�1.54 and GH�1.55 due to strong reserves position of the country which stood at $4.7 billion at the end of August 19, 2011, translating into an average of 3.7 months of import cover for goods and services and the relatively strong capital account inflows. Ghana�s currency is pegged to the American Dollar and therefore the nation undertakes foreign trading activities with the �green� currency. Traders, including rice importers and spare parts dealers, often use the dollar to transact business and therefore any decline of the cedi tends to increase cost which is passed onto consumers. This means the price of items goes up accordingly. A stable exchange rate also allows foreign investors to put their capital in Ghanaian equities, since they will record gains at the time they would be retrieving their investments.