The Ghana Union of Traders’ Associations (GUTA) has attributed the recent appreciation of the cedi to a significant drop in demand for foreign currency, as traders shift away from the dollar in favour of the strengthening local currency.
Charles Kusi Appiah, Head of the Business and Economic Bureau at GUTA, explained that this change reflects growing confidence in the cedi’s stability, which has seen a notable recovery in recent weeks.
“A Shift in Currency Strategy”
Speaking on Joy News’ PM Express Business Edition on May 8, Appiah highlighted how this shift in currency strategy marks a turning point for many traders who have long relied on the dollar as a hedge against economic uncertainty.
“When the cedi is weak, the dollar becomes the store of value,” he noted. “But with the cedi appreciating, holding onto forex now means potentially losing value.”
Impact of GoldBod on Dollar Demand
Appiah pointed to the launch of the GoldBod platform as a major factor reducing demand for foreign exchange. The platform, which facilitates international transactions using gold, has lessened the need for dollars among traders.
“With most of our international trade now settled through GoldBod, the need to hold large sums of foreign currency has diminished,” he said.
Traders Rethinking Currency Strategy
Appiah shared that some traders are now questioning the wisdom of holding onto depreciating dollars when the cedi continues to strengthen.
“Just today, a trader asked me, ‘What should I do with my forex holdings?’ and I told him to consider liquidating,” he said. “There are other investment options, like gold, that offer better value in the current climate.”
Market Dynamics and Working Capital
Appiah emphasized that this trend is not merely psychological but reflects real market dynamics.
“When forex is strong, our working capital suffers,” he explained. “But now, with the cedi on the rise, there’s less incentive to hoard dollars.”
Outlook for the Cedi
Appiah advised traders to stay alert to these changing dynamics, suggesting that those holding onto forex for stability might need to reconsider their strategies as the cedi continues to gain ground.
“This is not just sentiment,” he concluded. “It’s a fundamental market shift driven by real choices and changing economic realities.”
