The increase in the number of bids submitted at the first multiple-price foreign exchange forward auctions held in the year 2021 suggest a rise in the demand for forex even after the Central Bank pegged the target amount at US$ 50 million.
The Bank of Ghana intimated that 136 bids were submitted as against 100 bids submitted for the immediate past forex forward auction held to close the year 2020, depicting an increase in the demand for foreign exchange.
This further shows a spike in the appetite of investors in the foreign exchange market to buy US dollars with the goal of earning from the conversion rates.
Subsequently, the bid cover ratio which is the dollar amount of bids received in the foreign exchange auction versus the amount sold lingered around 2.76×, meaning that the worth of total bids made up 2.76 times the stipulated target set by the Bank of Ghana.
Analyst propose that to obtain an accurate measure of demand, it’s necessary to compare an auction’s bid-to-cover ratio to the average of the previous 12 auctions hence the bid cover ratio of 2.76 times is an indication of an averagely good demand for forex compared to an average of 2.5 times for previous auctions.
Additionally, the total number of bids submitted by banks were worth US$137.75 million and is much higher than last auction’s US$77.25 million, representing a whopping 78 percent increase.
In keeping with the stipulated target, however, only US$50 million worth of bids were accepted. Unfortunately, US$ 250,000 invalid bids were classified as null and void rendering them inadmissible because they “did not meet the forex forward auction guidelines”.
Giving further insights into the auction, the Bank of Ghana accepted 54 out of 136 bids submitted by banks with the 7-Day tenor being the highest purchased bid, recording a total of 50 bids.
The report further reveals that except for the 15-Day tenor and 30-Day tenor which came close to the 7-Day tenor by recording 50 bids and 22 bids respectively, all the other Tenor recorded low levels with 45-Day and 60-Day tenors having 9 bids and 3 bids each submitted by banks in that order and extremely lower levels of 1 bid submitted for the 75- Day tenor.
Even though the banks submitted up to 51 bids for the 7-day tenor, the Bank of Ghana asserted that it accepted only 20 of the bids. In a similar vein, only a fraction of the bids submitted for the 15-Day tenor were accepted, with only 16 bids being accepted out of the total of 50 bids submitted as well as 9 bids and 5 bids got accepted for the bids submitted under the 30-Day and 45-Day tenor respectively. For the remaining tenors, all bids submitted by banks got accepted.
Finally, detailing the range of rates for the auction, the Bank of Ghana disclosed that for bids submitted, the 30-Day tenor logged in the highest average rate of 5.85 and for bids accepted, the 15-Day tenor came top recording a high average rate of 5.84. The remaining tenors also recorded a similar but marginally lower range of rates with the least being the 75-Day tenor which lingers at 5.785 for both bids submitted and accepted.
This affirms analysts’ predictions that the new year will see a boost in investors’ confidence and appetite for various financial asset classes accompanied with the vaccine optimism.
