Last week, Birr experienced pronounced volatility against the U.S. Dollar, revealing deep-seated structural imbalances and an immediate liquidity crunch in the foreign exchange market. The turbulence coincided with the National Bank of Ethiopia's (NBE) injection of 175 million dollars into the market, targeting the currency's stability and ensuring sufficient forex availability for critical imports like fuel through the Ethiopian Petroleum Supply Enterprise (EPSE).

The trend observed throughout last week unveiled a marked depreciation of the Birr, with rates edging closer to the psychological barrier of 130 Br to the Dollar. The Central Bank's auctioning of forex has done little to narrow the gap between official and parallel market rates, demonstrating the inadequacy of the injected amount relative to demand pressures.

Commercial banks' exchange rate disparities remain apparent despite this intervention, revealing persistent supply-demand mismatches and ongoing speculative pressures. There was a widening gap in buying and selling rates among commercial banks, with spreads varying immensely, amplifying concerns about market distortions.

On average, the Birr's buying rate against the Dollar was 112.45 Br, while the selling rate averaged 125.42. This differential of 11.53pc signals sustained pressure on the Birr despite heightened demand for foreign exchange.

The Bank of Abyssinia (BoA) posted the lowest buying rate last week, quoting 103.07 Br for a dollar, contrasting with higher rates observed elsewhere in the market. Wegagen (WB), Enat (EB), and Oromia International (OIB) banks consistently quoted higher buying rates, all averaging above 112.50 Br, demonstrating their executives' more aggressive drive in forex acquisitions. For selling rates, the ceiling was reached by Enat and Wegagen banks, each quoting as high as 127.24 Br and 127.18 Br, respectively, positioning them at the higher end of the spectrum. The premium these banks post could be attributed to limited forex availability, despite the recent forex injections by the Central Bank.

Lion International Bank (LIB) was an outlier in the forex game, maintaining relatively lower rates, 113.40 Br for buying and 125.50 Br for selling. The Bank's tighter spread of 10.7pc revealed its executives' conservative approach during forex turbulence, possibly meant to address the risk and avoid speculative pressures that could further weaken the Birr. The highest spread was observed at Addis International Bank (AiB), which quoted 108.55 Br for buying and 125.88 Br for selling, representing a 16pc gap. The Bank's executive may anticipate further depreciation and a potential reluctance to release its limited dollar holdings into the market.