The sharp drop in inflation in the month of November 2023 is expected to improve market sentiments and ease the pressure on the cedi in the near term.
This is coming after the local currency remained stable against the dollar in the retail market last week.
However, the cedi recorded a mixed performance amidst improved foreign exchange liquidity and cooling inflation. The cedi shed 0.36% week-on-week against the pound on the retail market.
Inflation witnessed a significant decline in November 2023, dropping to 26.4% year-on-year from the previous month’s figure of 35.2% year-on-year, indicating cooling price pressures. This is the fourth consecutive month of decline, primarily due to a sharp decrease in food inflation, which eased by 1260 basis points to 32.2%.
At the 42nd foreign exchange auction to the Bulk Oil Distribution Companies, the Bank of Ghana provided $20 million at a forward rate of ¢12.15 to a dollar.
Additionally, the central bank sold about $3 million in the spot market. Following the improved market liquidity, the cedi closed 5.55% stronger versus the euro and remained stable against the dollar.
Analysts expect the ease in inflation to boost market sentiment and consequently strengthen the cedi.
Meanwhile, the cedi has lost about 14% in value to the dollar in the retail market and 24% on the interbank market.
The Bank of Ghana currently quotes one dollar to ¢11.64.