The USDGHS (GHS per USD) exchange rate is experiencing a technical rebound, the macro fundamentals for the economy has not changed yet. It will take multiple economic cycles to change the long-term trends the Cedi has been on.

That’s because currencies are driven in the short-term by technical factors, while driven by macro fundamentals in the long term, as I have drawn in the diagram for the USDGHS exchange rate. The Cedi has been depreciating for a long time since Kuffour’s administration. Our country still has major work to change the structure of the economy and to narrow our differential interest rates with other trading partners.

The red box shows where we are today at 12.30 FX rate. This technical rally has been driven largely by 1) decreased institutional demand for dollars, especially as government still has considerable arrears due to contractors and service providers. 2) BoG intervention on the market, which is now beyond just support for client FX needs but also supporting the banks when they are short FX. Banks are now not outbidding each other for remittance flows and other export flows. 3) Improved gross international reserves – despite significant market intervention (over USD 3bn in 6 months) and strong gold prices 4) Lower oil bills have lesson pressure on demand for dollars. 5) by a weakening US dollar that has translated into about 5.7% of the Cedi appreciation against the dollar.

Banks are happy because it is really not in the interests of banks to hold dollars since doing business and reserving against non-domestic currencies is too costly for every bank in any jurisdiction. This takes a bit of pressure of them.

In the long-run, if we seriously want to change the structural trend for our economy, we have to learn to love our currency and give up our appetite for foreign currency as cash instruments on the ground.

If you believe the black man can manage his own affairs, then start doing it.