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Maiden FX forward auction oversubscribed

The maiden foreign exchange forward auction conducted by the Bank of Ghana has been oversubscribed by the commercial banks who placed bids worth well above the initial offer of US$ 50 million by the Bank of Ghana.

A notice from the BoG indicates that bids amounting to US$ 51.3 million were received from businesses through their dealers and commercial banks.

However, the central acceptably priced bids for transactions of 7 days and 15 days tenors.

For the 7-day tenor, 24 bids were made for a total amount of US$34.40 million from the BoG, a rates of between GH¢5.15 and GH¢5.40. However, the central bank opted to sell only US$12.5 million at rates of between GH¢5.35 to GH¢5.36.

In the case of the 15-day tenor offer, nine bids were tendered, for a cumulative amount of US$ 9.35 million, but the central bank only accepted US$ 4.25 million.

The central bank did not accept any bid for the 30-day, 45-day, 60-day and 75-day tenors even though tenders were placed. This was ostensibly because the BoG was not satisfied with the rates offered.

It is believed most banks went for the shortest tenured forward sales because they and their customers were unsure of what pricing differential to apply between current spot rates and expected rates at the respective delivery dates

The forward FX auction form part of efforts to creates more certainty for clients for future FX needs and ease the seasonal end of year pressure on the spot FX market.

It is expected that the central bank will open another window to provide foreign exchange to bank clients based on verified commitments.

Background

The auction was held with a maximum bid size of a single bid not exceeding 10 percent of the announced target for the auction. The cumulative volume of all bids from any single bank were not to exceed 20 percent of the announced target for the auction.

The central bank expected that the maximum bids to be submitted should not exceed three bids per authorized dealer banks.

Successful banks are expected to provide the required Cedis on trade date in the case where they are buying a forward contract. Allowable spread between bids and offers for banks’ clients shall be 25 pips/0.0025 Cedis.

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