The Bank of Ghana has accepted 60 bids out of the 137 bids submitted by banks at the latest multiple-price foreign exchange forward auctions held.
This is higher compared to last time’s forex sales where 54 bids got accepted out of 136 bids, suggesting a rise in the demand for foreign exchange even after the Central Bank pegged the target amount at US$ 50 million.
According to the central bank, the purpose for conducting bi-weekly forex sales is to improve liquidity on the market and deepen the Foreign Exchange Market.
Analysts have equally asserted that this forex sales initiative would help businesses better plan for their forex needs and also, it creates more certainty for clients for future foreign exchange needs and alleviate unnecessary pressure on the spot FX market.
This result 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.
Out of the US$129.5 million worth of bids submitted by banks only US$50 million worth of bids were accepted in keeping with the stipulated target.
However, US$ 500,000 invalid bids were classified as null and void rendering them inadmissible because they “did not meet the forex forward auction guidelines”. The rejected bids were more than previous auction’s US$ 250,000.
Unfortunately, the bid cover ratio which is the dollar amount of bids received in the foreign exchange auction versus the amount sold dipped marginally to 2.59x as against 2.76× recorded in the immediate past auction.
This means that the worth of total bids made up 2.59 times the stipulated target set by the Bank of Ghana. However, Analysts hold that for an accurate measure of demand, one must compare an auction’s bid-to-cover ratio to the average of the previous 12 auctions. Hence, this suggests an averagely good demand for forex compared to an average of 2.5 times for previous auctions.
Giving further insights into the auction, the Bank of Ghana revealed that the Foreign Exchange Forward rate Auction is limited to 7-day, 15-day, 30-day, 45-day, 60-day, and 75-day tenors.
The report further reveals that the 7-Day tenor being the highest purchased bid, recorded a total of 51 bids. The 15-Day tenor and 30-Day tenor also came next to the 7-Day tenor recording 40 bids and 28 bids respectively. All the other Tenor recorded low levels with 45-Day and 60-Day tenors having 12 bids and 4 bids each submitted by banks in that order and extremely lower levels of 2 bids 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 40 bids submitted as well as 12 bids and 6 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.
