July 16, 2015 / 4:55 PM / in 4 years

Ghana's cedi rallies 3 pct against dollar on cbank measures

ACCRA, July 16 (Reuters) - Ghana’s cedi rose three percent on Thursday, a day after the central bank announced policy measures to boost forex inflows, including allowing foreign investors to buy its two-year domestic bonds.

The bank of Ghana on Wednesday kept its benchmark interest rate unchanged at 22 percent, citing improvement in inflation outlook as the local currency consolidated a reversal after months of decline.

It also plans to continue dollar sales to the interbank market, governor Henry Kofi Wampah said, signalling a relentless support for the cedi, which rallied significantly in July after slumping 25 percent in the first six months.

Ghana, which exports, cocoa, gold and oil is implementing a three-year aid deal with the International Monetary Fund (IMF) to tackle the economy, dogged by deficits, high public debt and inflation.

The cedi stood at 3.3000 against the dollar by 1645 GMT on Thursday, six percent lower than at the start of the year, from Wednesday’s 3.400 close, according to Thomson Reuters data.

Wampah said the country expected to receive at least $4 billion by December in loans and donor support, in addition to export receipts.

Analysts say the central bank’s new measures and expected inflows could further strengthen the currency.

“The big takeaway is the BoG’s (Bank of Ghana) willingness to allow foreign participation in Ghana’s 2-yr note...the hope is that this will improve forex inflows,” said Standard Chartered Bank economist Razia Khan.

Currency analyst Joseph Amponsah projected that the cedi could wipe off all its losses this year by close of next week on the “positive” signals from the central bank.

The cedi’s appreciation will also be seen as evidence of the impact of Ghana’s program with the IMF, others say.

“Holding the monetary policy rate unchanged and strengthening liquidity management should also help to support the cedi...but maintaining exchange rate stability is based on lower government spending,” said Ecobank said in a research note. (Reporting by Kwasi Kpodo; Editing Bate Felix and Daniel Flynn)

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