The Bank of Ghana (BoG) for the first time failed to sell the entire amount that targeted in its Foreign Exchange Forward Sale.
The Central Bank was expected to sell 25 through its FX Forward sale but only decided to give the investors and banks $3.7 million.
Details of the November 26 fx forward results
Based on the auction results, 51 bids submitted were looking for $43 million over 7 days, at a rate of not more than GH¢5.11. However, the Bank of Ghana did not honour any of these bids.
35 bids submitted were looking for $24 million in 15 days. They proposed a rate rage of GH¢5.36 – GH¢5.50. But the Central Bank rather just gave them $1 million within a rate of GH¢5.48.
About $14 million submitted over 30 days tenor, the Central Bank just decided to accept, 3 bids giving out $1.7 million within a rate range of GH¢5.48 and GH¢5.50. $500,000 bids were submitted by some banks and dealers, with a proposed 45 days tenor, but the Bank of Ghana accepted to give out all these amounts at a rate of GH¢5.48.
BOG on forward auction results
The recent result of the auction has raised questions about what might have been the reason for the little dollar supply. But the Bank of Ghana insists this had nothing to do with them having the required dollars to meet the market demand.
According to a source at the Bank of Ghana, “FX Forward auction failed because the rates quoted by participating banks did not align with the true level of rates that our markets intelligence gathered”.
The source added that “The Bank of Ghana, therefore, wanted to signal strongly that it wouldn’t allow the forward auction to be used to subside the sale of dollars to banks when they do not reveal themselves at true levels”. The offer did not because we did not have dollars or building reserves.”
Structure of the Auction
The Bank of Ghana, the Foreign Exchange Forward rate Auction is limited to 7-day, 15-day, 30-day, 45-day, 60-day and 75-day tenors starting on October 01, 2019 to December 2019.
The BoG also said, in addition to the auction guidelines, all Authorized Foreign Exchange Dealer Banks shall also comply with the provisions of the Code of Conduct for the Interbank Foreign Exchange market in Ghana.
The Central Bank has so far sold $100 million to investors and dealers through the forward auction sale. It plans to sell $125 million through this forward auction by the end of this year.