IC Securities Revises 2024 USD/GHS Exchange Rate Forecast

Research firm IC Securities has revised its end-2024 US dollar to Ghana cedi rate to GH¢15.91/US$, from its initial forecast of GH¢13.2/US$. This adjustment is based on the current macroeconomic environment.

"Following the unexpected cut in the policy rate by the Bank of Ghana in January 2024, we indicated our deferred inclination to raise our forecast for the US dollar Ghana cedi FX rate as we foresaw strong selling pressure on the local currency. Our decision to delay the revision to our forecast until mid-year was anchored on expected programme-related inflows and the final tranche of the cocoa syndicated loan for the 23/24 season," IC Securities explained.

However, these anticipated inflows did not fully materialise, while the supply of GHS (Ghana cedi) overwhelmed the market. The subsequent adjustment to banks' Cash Reserve Requirement (CRR) exerted limited pressure on local currency liquidity as banks mostly converted their maturing Bank of Ghana securities into the CRR positions. Additionally, the seeming fiscal expansion via the clearance of contractor arrears continued to propagate GHS liquidity in the forex market, resulting in increased pressure on the local currency.

IC Securities added that the expected inflow of approximately $2.3 billion in the remainder of 2024 appears largely attainable as the indicative timelines add some credibility to its expectations.

The firm continued that the cedi would benefit more from the signalling effect of the World Bank inflows and less from actual foreign exchange sales, as the Bank of Ghana continues to implement constrained interventions amidst reserve build-up.

"While these inflows could trigger a short-term retracement, we foresee continued hedging by domestic investors as we approach the December elections, which will potentially offset any inflows-induced appreciation. Consequently, we raise our forecast for the end-2024 US$/GHS rate to GH¢15.91/US$," IC Securities concluded.

Presently, the local currency is trading at about GH¢15.00 to the dollar at the forex bureaus.

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