The Ghanaian cedi’s more than 27% year-to-date depreciation against the dollar appears to be easing, as the upcoming U.S. Federal Reserve rate cut on September 18 could weaken the dollar, offering the cedi a chance to rebound.
In August 2024, Ghana inaugurated its first gold refinery, the Royal Ghana Gold Refinery, which is set to refine 400 kilograms of gold daily using raw materials from artisanal and small-scale miners nationwide, boosting the country’s earnings.
Following the refinery’s launch and news about a 2.39% drop in inflation, the cedi strengthened in August, reversing a decline that saw it briefly touch 16 GHS in the first week of the month.
However, with speculation that the US Federal Reserve might cut rates by up to 50 basis points on September 18, 2024, a potential weakening of the dollar could further strengthen the cedi, building on the resilience it demonstrated in August.
What to Know
- Ghana’s cedi is already showing signs of recovery, supported by favorable developments in August, including a 2.39% reduction in inflation and the inauguration of the Royal Ghana Gold Refinery.
- The refinery is a public-private partnership between Rosy Royal Minerals of India and Ghana’s central bank, with Ghana holding an 80% stake.
- With a capacity to process 400 kg of gold per day, it is expected to boost Ghana’s earnings, especially considering a disappointing cocoa season in 2024, driving positive investor sentiment and lifting the currency.
- A US Federal Reserve rate cut, designed to make borrowing cheaper for businesses and consumers in America, often leads investors to seek higher yields elsewhere, potentially weakening the dollar.
- If the dollar softens after the rate cut, currencies like the cedi, which are paired with the dollar, could strengthen, offsetting losses from earlier dollar strength.
USD/GHS Trend
- Like Nigeria’s naira, the cedi has been gradually depreciating against the dollar for several years, with significant declines starting in 2016.
- The depreciation accelerated in February 2022, and by November of that year, the cedi had fallen by 132%, reaching a low of 14.40 GHS.
- In December 2022, the currency appreciated to the 9.98 GHS range but has continued to weaken since then, briefly hitting 16 GHS in the first week of August 2024.
- However, the favourable economic news in August, including the drop in inflation and the refinery’s inauguration, helped halt the cedi’s seven-month depreciation streak in 2024.
- If the US Federal Reserve announces a rate cut on Wednesday, and the dollar weakens as a result, the cedi could capitalize on this, further strengthening and offsetting its earlier declines.
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