BoG commits US$525m to FX forward market

The Bank of Ghana has since the turn of the year committed at least US$525 million in its forex forward auctions introduced last year as part of reforms to bring stability to the local currency.

Bids submitted during the year amounted to US$1.32bn out of which the central bank accepted US$ 525 million — which represents about 73 percent of the total targeted amount for the year.

The bids submitted were for the 7-day, 15-day, 30-day, and 45 -day tenors as well as the 60-day and 75-day tenors.

In total, 1,623 bids were submitted but the BoG accepted only 692 out of the total.

The demand for Forex was highest in the month of May, 2020, as a total of 228 bids were submitted.

In May, 2020, the BoG announced that, in order for the country to stand ever ready for any possible excessive demand for the US dollar in the near future, it had engaged the U.S. Federal Reserve for a US$ 1 billion repurchase agreement (REPO) facility for Foreign and International Monetary Authorities.

The facility, which is expected to be available for at least six months, provides an important foreign exchange buffer to boost dollar liquidity amid the COVID-19 global pandemic, and will further enhance the BoG’s dollar liquidity.

The initiative by the Bank has been described as prudent by many market analysts since it preempts any possible shocks that may come from a sharp demand for the US dollar in the short-term especially at a time when forex inflows from the major sources have seen a decline.

The activities of the central bank on the forex market has largely driven the stability of the Cedi this year, amid the coronavirus pandemic.

Data available from the Bank of Ghana shows that the local currency depreciated by 2.9 percent as at the end of September.