Cedi appreciation good but sustainability most important – Analyst

analystCurrency Analyst with Gold Coast Securities, Samuel Ampah says the recent appreciation of the cedi against major trading currencies is exciting but the most important thing will be how to maintain the trend over the long term.

Many individuals and business owners are excited about the rise in the value of the cedi, but Mr Ampah says the Bank of Ghana can only sustain it for a short-term.

Speaking on Adom FM’s morning show ‘Dwaso Nsem’ the Currency Analyst said “with this level of appreciation we might be able to sustain it in the short term but not the long term”.

The first five months of this year saw a speedy depreciation in value of the local currency.

This negatively affected economic activities in the country, increasing the prices of goods and services.

However, after the Bank of Ghana begun pumping $20 million weekly into the currency market resulting in a remarkable recovery over the last couple of weeks.

The cedi which was sold for some 4.3 cedis to the dollar in June is now selling at 3.3 cedis as of Tuesday, July 14, 2015.

Meanwhile, some business owners have complained about the varying rates being offered at some of the forex bureaus.

Mr Ampah is of the view that, the recent depreciation of the cedi was speculative because “as soon as the Bank of Ghana announced that it was going to pump $20 million into the economy, the value of the cedi started going up.

This means that “it was speculators who caused the depreciation of the cedi”, he stressed.

He, however, worries that “the value of the cedi might be affected if the Finance Ministry begins to pay some of its commitments”.

Mr Ampah said it was necessary for the Bank of Ghana to consistently push some dollars into the system in order to cushion the economy and reduce speculations which will lead to a depreciation of the cedi.

“I think that the [$20 million injected into the economy every week] is a good move by the central bank and clearly the cedi is regaining value but the long-term sustainability is what matters. if we can for the next two three or four years sustain the cedi and keep things this way, then the economy will make gains”, he said.

He, however, doubts if the local currency would return to a one-to-one exchange rate as was the case in 2008.

Currency Analyst with Gold Coast Securities, Samuel Ampah says the recent appreciation of the cedi against major trading currencies is exciting but the most important thing will be how to maintain the trend over the long term.

Many individuals and business owners are excited about the rise in the value of the cedi, but Mr Ampah says the Bank of Ghana can only sustain it for a short-term.

Speaking on Adom FM’s morning show ‘Dwaso Nsem’ the Currency Analyst said “with this level of appreciation we might be able to sustain it in the short term but not the long term”.

The first five months of this year saw a speedy depreciation in value of the local currency.

This negatively affected economic activities in the country, increasing the prices of goods and services.

However, after the Bank of Ghana begun pumping $20 million weekly into the currency market resulting in a remarkable recovery over the last couple of weeks.

The cedi which was sold for some 4.3 cedis to the dollar in June is now selling at 3.3 cedis as of Tuesday, July 14, 2015.

Meanwhile, some business owners have complained about the varying rates being offered at some of the forex bureaus.

Mr Ampah is of the view that, the recent depreciation of the cedi was speculative because “as soon as the Bank of Ghana announced that it was going to pump $20 million into the economy, the value of the cedi started going up.

This means that “it was speculators who caused the depreciation of the cedi”, he stressed.

He, however, worries that “the value of the cedi might be affected if the Finance Ministry begins to pay some of its commitments”.

Mr Ampah said it was necessary for the Bank of Ghana to consistently push some dollars into the system in order to cushion the economy and reduce speculations which will lead to a depreciation of the cedi.

“I think that the [$20 million injected into the economy every week] is a good move by the central bank and clearly the cedi is regaining value but the long-term sustainability is what matters. if we can for the next two three or four years sustain the cedi and keep things this way, then the economy will make gains”, he said.

He, however, doubts if the local currency would return to a one-to-one exchange rate as was the case in 2008.

source: myjoyonline.com