US$ 25m to be injected onto FX market

The Bank of Ghana over the coming weeks will issue onto the forex market a total of US$ 25 million, following a successful FX forward auction held on November 12, 2019.

A notice from the BoG indicates that bids amounting to US$ 71.5 million were received from businesses through their dealers and commercial banks, this being well over the sales target of US$ 25 million.

The bids submitted were for the 7-day, 15-day, 30-day, and 45 -day tenors. In total, 90 bids were submitted but only 36 of the bids were accepted by the BoG. More bids were submitted in this round of auction compared with the last auction held in October.

Of the 49 bids submitted for the 7-day tenor at US$ 47.5 million, the central bank accepted only 10 bids totaling US$ 10.5 million. For the 15-day tenor, US$ 9 million was accepted, while the 30-day and 45-day bids were allotted US$ 5 million and US$ 500,000, respectively.

The central bank rendered a total of US$ 3.25 million as invalid bids.

The ongoing forward FX auctions, which commenced in October, form part of efforts to create more certainty for clients for future FX needs and ease the period 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 was 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 will be expected to provide the required Cedis on trade date in the case where they are buying a forward contract. The allowable spread between bids and offers for banks’ clients is 25 pips/0.0025 Cedis.