The Central Bank again got more request for dollars than what it was prepared to sale in its forward forex sale.
At the end of its last forward sale of dollars for this year, dealers, banks and investors were looking for about $91. 3 million dollars.
However, the Bank of Ghana was willing to sell $25 million. The development again shows that there is a high demand for dollars by commercial banks and currency dealers to meet the demand of businesses.
But unlike the last auction, the central bank was able to sell all the dollars that it had promised to give out during the auction.
Details of the forex auction
In all, 111 bids came from currency dealers and commercial banks. The tenor or the time that these dealers were looking forward ranged from 7 days to 75 days.
Those investors that wanted the dollars to be provided by the Bank of Ghana in 7 days after the auction did bid $40.6 million with a rate range of GH¢5. 48 to GH¢5.67.
But the Central Bank just accepted 13 bids out of the 42 submitted and was willing to offer $6.5 million within a rate range of GH¢5.64 to GH¢5.65.
For those that were looking for dollars over a 15-day tenor, 35 bids came in, with a request of $25 million but received only $10 million. This is because the Central Bank decided to accept 18 bids, at a rate range of GH¢5.64 -5.66. For 30 day Tenor the Bank of Ghana offered $7.2 million at rate range of GH¢5.64 – GH¢5.66.
This is despite the fact that, 26 bids came in from dealers that were looking for 19 million dollars, as they offered a rate range of GH5.63 and GH¢5.66.
About $2.6 million requests came from dealers seeking to be supplied in 45 days, at a maximum rate of GH¢5.67, but the Bank of Ghana was prepared to give out $500, 000 at a rate GH¢5.67. $750 000 were offered by dealers looking for dollars, that would be supplied in 60 days.
But in this case, the Bank of Ghana did meet all their request by promising to provide the $750, 000 at a rate of GH¢5.63.
Could this help halt recent sharp depreciation of the cedi?
Well, there are some who have argued that the forward auction-rate has not brought about the required excitement in terms of firmly stabilizing the Ghana cedi.
This is because the Ghana cedi is still under some sought of pressure. But the Bank of Ghana, on the other hand, does not think so. They have argued that the move has eased the pressure of the spot market and given some assurance to businesses that do not need dollars now but the future.
BOG on forward auction results
The recent result of the auction has raised questions about what might have been the reason for the little dollar supply. But the Bank of Ghana insists this had nothing to do with them having the required dollars to meet the market demand.
According to a source at the Bank of Ghana, “FX Forward auction failed because the rates quoted by participating banks did not align with the true level of rates that our markets intelligence gathered”.
The source added that “The Bank of Ghana, therefore, wanted to signal strongly that it wouldn’t allow the forward auction to be used to subside the sale of dollars to banks when they do not reveal themselves at true levels”. The offer did not because we did not have dollars or building reserves.”
Structure of the Auction
The Bank of Ghana, the Foreign Exchange Forward rate Auction is limited to 7-day, 15-day, 30-day, 45-day, 60-day and 75-day tenors starting on October 01, 2019, to December 2019.
The BoG also said, in addition to the auction guidelines, all Authorized Foreign Exchange Dealer Banks shall also comply with the provisions of the Code of Conduct for the Interbank Foreign Exchange market in Ghana.
The Central Bank has so far sold $100 million to investors and dealers through the forward auction sale. It plans to sell $125 million through this forward auction by the end of this year.