Birr Gains Ground at Forex Auction, For a Change

The Birr traded at 131.71 against the Dollar at a central bank auction held today, marking a slight 2.96pc uptick.

The National Bank of Ethiopia (NBE) offered 50 million dollars in what is now its third auction since authorities floated the currency regime in late July of last year. A day before the auction, Governor Mamo Mihretu announced that such sales would be held every other week.

Twelve commercial banks participated in the latest round, following the previous auction’s 27 bidders, which led to a weighted average exchange rate of 135.61 Br to the dollar.

Nontheless, demand for foreign currency remains high, surpassing available supply. At the first auction held in August 2024, the weighted average stood at 107.9 Br, displaying a 22pc gain for the dollar this week.

Central bank officials attributed their decision to hold a bi-weekly forex auction to an improved balance of payments, helped along by higher export revenues, steady gains in remittances, and record-high gold proceeds. Yet, the disparity between the auction’s outcome and the lowest buying rate of 124.01 Br a dollar at the Commercial Bank of Ethiopia (CBE) points to persistent shortages, despite a stronger foreign exchange reserve. Governor Mamo disclosed that reserves have climbed 200pc from levels seen before forex market liberalisation, which analysts believe may bring the total to around two billion dollars.

The NBE confirmed another auction will take place in two weeks, with the specific date set to be announced a day ahead of the sale.