Cedi Depreciates 1.41% Against US Dollar, What's Behind the Decline?

Accra ,August 19,2025 - The Ghanaian cedi has experienced a decline in value on the interbank market since last week, with analysts warning of potential further weakening in the near future. 

According to Databank Research, the cedi depreciated by 1.41% against the US dollar, 2.82% against the euro, and 3.73% against the pound over a two-week trading period, closing at GHS10.65/USD, GHS12.47/EUR, and GHS14.45/GBP, respectively.

Factors Contributing to Cedi's Decline

- Shift in Investor Flows: Easing global tensions and a stabilizing CBOE Volatility Index (VIX) may lead investors to favor US dollar assets over gold, a key foreign exchange earner for Ghana.

- Corporate Demand Pressures: Renewed corporate demand pressures and thin foreign exchange support have contributed to the cedi's decline.

- Global Economic Trends: The US dollar's potential strengthening could further exacerbate the cedi's depreciation ¹.

Mixed Performance in Retail Market

In the retail market, the cedi showed mixed performance, with the USD/GHS pair trading between 11.50 and 11.90. The cedi recorded a modest 1.06% gain against the dollar and 0.64% appreciation against the pound, closing at GHS15.65/GBP. However, it slipped 0.73% against the euro to GHS13.70/EUR.

Outlook for the Cedi

Analysts caution that the outlook for the cedi remains uncertain, with potential weakening ahead if capital flows continue to favor the US dollar over commodities like gold. The cedi's year-to-date depreciation is around 14%, fueled partly by foreign exchange supply shortfalls ².

Historical Context

Ghana's economic history reveals instances where currency appreciation failed to translate into immediate consumer benefits. To achieve lasting stability, comprehensive structural reforms are essential, including:

- Maintaining Fiscal Discipline: Continued IMF program implementation is crucial.

- Addressing Domestic Cost Pressures: Energy sector improvements and transport infrastructure development can help.

- Strengthening Market Competition: Appropriate regulatory frameworks can ensure businesses pass forex gains to consumers.

- Diversifying Ghana's Economic Base: Reducing dependence on commodities can promote long-term stability.

Credit - Citinewsroom