The Ghanaian bank’s interest in the forex forward auction keeps increasing as the FX results from the bank of Ghana indicated that the bids are Oversubscribed by more than 100 percent.
The 7-Day Tenor which is the shortest term on the market dominated the bids submitted by banks for the forward forex rates auction held by the Bank of Ghana. This indicated the bank’s preference for the short term instrument.
The auction got bids totalling US$161.7 million, against a target of US$40 million. The BoG, however, moved to accept its target of US$40 million from the total bids.
At the auction, out of 162 bids submitted by the authorized banks, only 35 bids of the total bids were accepted by the Bank of Ghana.
Forward FX contracts exist in the following tenors: 7, 15, 30, 45, 60 and 75-day in addition to foreign currency swaps. At the operational level, bids are accepted from agents through their respective commercial banks across the available tenors in accordance with market rules published by Bank of Ghana.
The results from the FX auction revealed that the 7-day tenor had the highest number of subscriptions, with a total of 76 bids and its corresponding value of US$92.00 million, whereas the 45-day tenor recorded least bids of 4 with corresponding value of US$2 million.
Furthermore, the 15-day and 30-day tenor received bids of 60 and 22 respectively, with corresponding values of US$51.2 million and US$16.5 million respectively. However, the 60-day and 75-day tenor recorded no auction bids, just like the case of previous FX auction.
Unlike the previous auction, which recorded no invalid bids from the total bids, the recently organized FX auction did record invalid bids valued to a tune of US$ 6000,000.
The bids cover ratio hovered around 3.34×, meaning that the worth of total bids submitted was up to 3.34 times the stipulated target set by the Bank of Ghana. This exceeds the previous ratio of 3.08×, the Bank of Ghana mentioned.
The Auction Rate
The Bank of Ghana intimated that the 15-day tenor logged in the highest range of rates for bids accepted, reaching between 5.98 and 6.10. The range of rates for bids submitted for the 30-Day tenor recorded the minimum rate of 5.98 and maximum of 6.05. The remaining tenors also recorded a similar but marginally smaller range of rates.
Conduct of FX forward rate auction
As part of the reasons why the Bank of Ghana introduced the Forex Forward Auction initiative in October 2019 was to create an aura of certainty for individuals and institution who have future transaction tied to foreign currencies.
The FX forward rate auction is tailored to relieve the foreign exchange market of insurmountable pressures, and to help stabilize the cedi over time.
As part of the essence of the conduct of the FX auction by the central bank, it is to help control exchange rate fluctuations, to alter money supply and also to finance government imports and exports.
The FX forward rate auction is conducted by authorised officials of the Bank of Ghana. Prior to the auction, the proposed date and time will be published on the website of BOG, and on the BOG page on the Reuters Terminal.
The publishing of the date and time is to help notify and remind participants of the upcoming auction- only Authorized Licensed Foreign Exchange dealing banks
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