Central Bank Keeps a Tight Grip as the Birr Crawls Downward

Jan 31 , 2026.

Last week’s sequence of foreign-exchange rates revealed a story more revealing than any headline auction figure. It showed a currency regime in which depreciation is administered rather than discovered, and in which calm is not the product of balance but of control.

The Birr (the Brewed Buck) continued to weaken, but only by design. The Central Bank’s record-sized foreign-exchange auction on January 27, 2026, briefly shifted wholesale dynamics but did not alter the deeper structure of the market. Instead, it reinforced it. What unfolded across the windows of commercial banks was not competition, but choreography. Taken together, the auction and daily bank postings resembled two closely coordinated instruments rather than independent markets. One set the rhythm, the other enforced order at the cash window.

The most notable feature was the marginal movement in cash rates. Most banks posted changes measured in hundredths of a Birr, not full units. Abyssinia Bank’s buying rate inched from 152.59 on January 26 to 152.61 Br by January 31. Zemen moved from 153.58 to 153.60 Br. Dashen posted a slight rise from 151.73 to 151.75 Br. The Commercial Bank of Ethiopia (CBE), the industry's anchor, remained at 151.60 Br for nearly four weeks.

These figures do not reflect market-clearing price discovery; they only manifest a tightly managed crawl, with banks treating the official quote as a compliance signal rather than a response to supply and demand. Discipline is further cemented by adherence to the regulator-imposed two percent cash spread. Almost without exception, banks set selling rates at nearly 1.02 times their buying quotes. Taking the week’s industrial average buying rate of 152.73 Br for a dollar, the corresponding average selling rate landed around 155.78 Br.

However, the essence was not in the decimals, but in the pattern, as the spread becomes a rule, the market turns into a corridor. Competition shifts away from pricing toward access, allocation, and relationships. Posted rates usually settle into a narrow band.

Against this backdrop, last week's largest-ever auction served as a wholesale anchor for the cash market. Its oversubscription rate of 1.18 was modest, and the narrow range of accepted bids, 153.50 Br to under 155 Br, signalled that banks have internalised an implicit ceiling. The auction’s cut-off rate of 154.24 Br and weighted average of 154.82 Br showed some competitive tension at the margins but no rush to chase dollars at any price.

The message for the market was clear. The Central Bank has the capacity to supply, the corridor is enforced, and pushing the upper limit is discouraged. When that signal is credible, banks align, as the benefit of diverging is limited and the risk of supervisory scrutiny is not.

Most commercial banks’ buying rates were clustered between 151.6 Br and 153.6 Br for the dollar, while selling rates were about three Birr higher, consistent with the official two percent spread. Over the week, the movement was marginal. The typical private bank’s buying rate increased a few cents, a sign of managed adjustment, not a free market. Abrupt repricing or sudden jumps were absent.

An outlier last week was the National Bank of Ethiopia (NBE). Every day, it posts identical buying and selling rates, effectively a zero spread, a reference rate, anchoring expectations and reinforcing the intent that depreciation proceeds in an orderly and policy-driven manner rather than at the whim of market forces.

Nonetheless, Oromia Bank stood apart, quoting the highest buying and selling rates throughout, buying above 155 Br, selling near 158.35 Br. This premium may signal an aggressive drive to acquire foreign currency or a strategy to lure scarce cash dollars. Zemen Bank also remained above the big-five private banks group, posting buying rates above 153.5 Br by week’s end, perhaps mirroring more appetite for FX risk.

A temporary exception was ZamZam Bank, which, on January 27 and 28, posted a 3.31pc spread, well above the two percent standard, before reverting to the mean.

The CBE acted as a stable floor, with Dashen repeatedly posting among the lowest of large private banks, 151.75 Br on January 30 and 151.75 on January 31, sometimes below CBE’s own floor. Large private banks (Awash, Abyssinia, Wegagen, and Dashen) moved almost in lockstep, with buying rates in the low 152s, Dashen as the low-price laggard. Awash Bank sat at 152 Br, Abyssinia at 152.61 Br, and Wegagen Bank at 152.14 Br.

Banks sort themselves into clear behavioural groups. There are the followers, whose rates barely change. There are the low-price anchors, CBE and often Dashen, who appear to value stability over market share. There are the premium seekers, such as Zemen and, on occasion, Amhara Bank, signalling a greater hunger for supply. Oromia Bank remained a high-price outlier, apparently competing hardest for limited dollars.

The Central Bank, meanwhile, served as a reference and anchor, setting the highest buying rate with a zero spread and aligning the market.

The auction fitted neatly into this pattern. Modest oversubscription and a narrow bid range indicate that banks understand the corridor rules and bid accordingly. The weighted average above the cut-off showed some competition at the edge, but with a tacit ceiling below 155 Br, few are willing to push further.

The real accomplishment was not the sale of 500 million dollars but the reinforcement of a shared belief that monetary policy will ration supply and guide depreciation gradually. That belief lets the forex market remain calm, with small moves, uniform spreads, and tight clustering, even as Green Buck's scarcity persists.

Yet the calm is surface-level. Ongoing excess demand remained a structural reality. According to market watchers, the key takeaway from last week’s market was not a minor drift in bank quotes but the prominence of the Central Bank’s rate. When the monetary authority is the most aggressive “buyer,” scarcity has not disappeared. Policy was simply managing its expression. That may contain volatility and inflation in the short run, but without a sustained rise in export earnings, remittances, and external financing, large auctions can smooth the ride but cannot erase the underlying gap that makes the corridor necessary.

The pattern that emerged last week revealed that the foreign exchange market is guided by administrative hands rather than by competitive forces. Depreciation is happening in controlled, predictable steps, matching a crawl-like path. And, the actual market action is likely outside the cash window, in non-cash and informal channels, where spreads and prices are less constrained.

PUBLISHED ON Jan 31,2026 [ VOL 26 , NO 1344]