The pace of the depreciation of the cedi is anticipated to slow down, despite a 1.22% loss to the US dollar last week, leading to a year-to-date loss of over 14% in the retail market, per reports.

This expectation is attributed to an additional policy measure implemented by the Bank of Ghana (BoG), which involves unifying currency denominations and increasing the Cash Reserve Ratio of banks to 15%, effective November 30, 2023.

The Central Bank's move to unify currency denominations for the cash reserve ratio aims to slightly alleviate foreign exchange liquidity constraints in the coming weeks.

Governor of the Bank of Ghana, Dr. Ernest Addison, announced that banks would now hold reserves in foreign deposits in the local currency.

Analysts anticipate that this change will enhance foreign exchange liquidity in the short term, as banks sell forex to unlock cedi liquidity. The increased Cash Reserve Ratio is expected to absorb some cedi liquidity, easing cedi-funded foreign exchange demand in the upcoming weeks.

This policy measure is projected to release approximately $750 million, improving liquidity conditions in the forex market, particularly around the Christmas season.

In the previous week, forex liquidity remained limited, with minimal intervention from the Bank of Ghana, leading to the depreciation of the cedi against major trading currencies. The currency experienced weekly declines of 1.48% and 0.94% against the pound and euro, respectively.