Ethiopia’s Latest Dollar Auction Signals Softer Bank Demand

Ethiopia’s latest foreign exchange auction drew less demand than the amount of dollars offered by the central bank, with banks submitting bids worth 123.49 million US dollars against 125 million US dollars available.

The National Bank of Ethiopia said 27 banks participated in the September 23 auction and all were successful. The 1.51 million US dollar gap between total bids and the amount offered made it the latest auction to close without full demand for the central bank’s allocation.

The marginal, or cut-off, exchange rate was 158.0715 birr per US dollar, while the weighted average rate of successful bids was 160.2297 birr per US dollar. The highest bid was 160.8869 birr per US dollar.

The auction was the 29th foreign exchange sale conducted by the central bank. The NBE has used the auctions as part of its shift towards a more market-based foreign exchange system, allowing banks to bid for dollars at rates they are prepared to pay.

The latest result contrasts with auctions where demand has exceeded the amount of foreign currency offered, and provides a snapshot of banks’ dollar requirements under the current foreign exchange regime.

Source: FSX Business News