The latest Foreign Exchange (FX) forward rates auction held on January 11, 2022, by the Bank of Ghana (BOG) has been oversubscribed by the forex licensed dealing institutions. The BOG had targeted $ 75 million in the foreign rates but received a pharaonic $235 million in oversubscription.
Per the auction results from the Central Bank, the Bank of Ghana accepted only 50 of the overall 144 bids made by authorized banks, accounting for 34.72 percent of the total bids. Out of the total of $ 235 million bids subscribed, $75 million representing 31.91 percent of the overall FX forward rates auction offer amount being accepted.
However, the FX forward rates auction saw some invalid bids, totaling $4.55 million, accounting for 1.93 percent of the total number of bids subscribed.
This is the first of six scheduled for the first quarter of 2022. This is consistent with the Central Bank’s goal of regularly buffering the local currency against the most widely traded currencies, particularly the American green buck.
Details of the Auction Results
The highest bids were made by dealers and bankers of the 7-day Tenor, who submitted 58 bids totaling $125.3 million. The Bank of Ghana, on the other hand, accepted only 20 bids and would pay them $40.5 million when the proposed timeframe arrives. The dealers offered 6.1 per cent as their highest rate for the tenor and 6.04 per cent as their lowest rate.
Banks and dealers submitted 50 bids totaling $34 million for the 15-day Tenor. Only 17 offers were accepted by the lender’s last resort. The highest rate offered by those dealers and banks was 6.1 percent, while the lowest rate offered by those dealers and banks for it was 6.04 percent. In all, the monetary authority will offer them $23 million when the date is due.
For the 30-day tenor, the Central banks accepted 10 out of 32 bids tendered for the tenor representing 31.25 per cent of the total bids accepted for the tenor. The maximum rate offered by those forex dealers for it was 6.11 percent, while the lowest rate offered for it was 6.10 percent. In all, the regulator will pay them $8.75 million when the tenor matures.
Meanwhile, dealers were uninterested in the 60-day and 75-day tenor bids as none were tendered for them and hence none were accepted.
Conduct of FX forward rate auction
The FX forward rate auction is “conducted by authorized 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”, BOG revealed.
The date and time are published to let participants be aware of the impending auction and to remind them of it. The bidding process is restricted to authorized licensed foreign exchange dealing institutions, according to the BOG.
Authorized banks who intend to participate in the auction are expected to send their bids to the BOG’s designated approved email address after the auction date and time are published. It is not possible to make changes to bids once they have been submitted, the Bank of Ghana noted
Furthermore, banks are allowed to submit a maximum of three (3) bids per tenor in the auction “quoting their desired amount at a freely determined exchange rate as per the quotation convention provided”.