Ghana’s currency, the cedi, depreciated against the US dollar by 8.3% during the first quarter of 2012, according to the Bank of Ghana (BoG).

This was against a 2% depreciation the currency recorded in the same period of 2011.

A report prepared by the Bank’s Monetary Policy Committee (MPC) and released April 13, 2012, showed that the cedi continued to weaken against the US dollar in the foreign exchange market as a result of high demand for foreign exchange.

“In the first quarter of 2012, the cedi depreciated by 8.3% against the US dollar, compared to 2% depreciation in the same period of 2011. The real effective exchange rate depreciated by 4.1% in the first quarter of 2012,” it said.

The report cited Ghana’s trade pattern with Asia especially China as one of the factors for the demand for foreign exchange.

“…the changing nature of our trade pattern which is shifting towards Asia, especially China, in which transactions are mostly conducted on cash basis. The absence of correspondent banking relationships between Ghanaian banks and their Asian counterparts has contributed to the reliance on cash,” said the report read by BoG governor Mr Kwesi Amissah-Arthur at a news conference in Accra.

Also the expansion of the Ghanaian economy has led to the growing demand for foreign exchange to support increased economic activity, said the BoG adding “this has exerted additional demand for foreign exchange”.

There is also the speculative activity by foreign exchange traders trying to profit from the depreciation of the currency as other market participants try to hedge against further depreciation thereby exacerbating the situation, the central bank pointed out.