Banks Split on Dollar Bids as Birr Slips from Policy Grip

Jun 8 , 2025.

The foreign exchange market looked calm last week, yet its surface stability masked growing tensions among the commercial banks. Buying prices for the Green Buck clustered tightly around 131.95 Br, while average selling prices were near 134.60 Br.

Most banks barely budged from those levels, signalling a conservative posture that industry observers say reflected either regulatory guidance or plain caution.

Outliers, however, told a different story.

Oromia Bank, yet again, set the pace at the high end, posting an average selling rate of 134.73 Br, far above the industry’s average and the Central Bank’s weighted average. Three of the big private banks – Awash, Wegagen and the Bank of Abyssinia – alongside their youngest peers - Hijira and ZamZam banks - strayed from the pack, demonstrating a willingness to pay up for scarce dollars or to lure retail customers dissatisfied with more conservative contenders such as the state-owned Commercial Bank of Ethiopia (CBE).

In the background, the National Bank of Ethiopia (NBE) held its seventh weekly auction since it rolled out a managed-float strategy in August last year. The Central Bank offered 50 million dollars; only 12 commercial banks bid, down from 16 in the previous auction. The weighted average clearing rate landed at 134.95 Br to the dollar.

Analysts see that figure less as an anchor than as a signpost, a rough indication of where policymakers would like the market to drift.

However, the auction’s influence had limits. On Saturday, Oromia Bank quoted a buying rate of 134.65 Br, 30 cents below the auction average but a hefty 3.20 Br above the week’s industry buying average of 131.45 Br. Its top-selling quote reached 137.34 Br. The Bank’s persistent high-side posturing pointed to an aggressive bid to meet dollar demand, a sign that Oromia Bank’s executives may be scrambling to honour obligations to correspondent banks.

At the opposite end, the CBE acted almost as a brake on depreciation. Its average buying rate for the week sat at 131.01 Br, and its selling rate at 133.63 Br, both of which were the lowest on the board.

Between those poles lies a middle tier of private banks — Wegagen, Bank of Abyssinia, Awash, Hijira and Zamzam — that nudged their buying prices past 132 Br. Their approach appears calibrated. They are close enough to the Central Bank’s guidepost to remain credible, yet flexible enough to secure supply when client demand spikes. Their convergence indicated that a pragmatic bloc is emerging, one that strikes a balance between competitiveness and risk.

Lower-volatility players, such as Debub Global, Buna, and Cooperative Bank of Oromia (Coop Bank), formed a third group. They kept movements minimal through the six-day window, with standard deviations so small they nearly vanished from statistical charts. Analysts see these banks as the market’s stabilisers. Whether constrained by thin liquidity or internal risk caps, they offered predictability at the cost of flexibility, rarely tweaking quotes even when others moved.

The week’s median numbers displayed that stratification: 131.95 Br for buying, and 134.6 Br for selling. While mid-tier banks drifted gently toward the auction average, Oromia’s elevated bids and CBE’s subdued offers stretched the market’s range.

There are now three market layers. At the top, aggressive buyers, such as Oromia Bank, pay premiums that indicate either dollar shortages or sizable external commitments. In the middle, an adaptable cluster responds to the policy signals while juggling client orders. At the bottom, public and risk-averse lenders stay inert, moving only when forced.

United Bank and Development Bank of Ethiopia (DBE) exhibited minute day-to-day swings, signalling tight reins on their currency positions. High-volatility names, adjusted for obvious data errors, hinted at operational flux, either hurried adjustments to liquidity gaps or deliberate tactical moves to ride small price waves.

The Central Bank’s weekly auctions were designed to guide expectations as the forex market inches from a fixed-rate past toward a managed float. But the widening gap between the auction’s weighted average and retail quotes, sometimes more than three Birr, shows the guideposts alone cannot force convergence.

For a Brewed Buck on a gentle depreciation path, these differences matter. If the gap between high-end bids and official auction levels keeps widening, it could undermine the Central Bank’s credibility and tip the Birr into a faster slide. If auctions begin to attract broader participation and larger volumes, the midpoint could stiffen, reining in the outliers.

For now, the Brewed Buck’s value is being discovered less through collective alignment than through quiet divergence. Each bank appears to be making its own call on dollar scarcity, customer needs, and policy risk. The auction provides a reference, but the market’s real work happens in the gaps where Oromia bids boldly, CBE sits back, and everyone else decides how close to skate to the edge.

In a managed float, price discovery is supposed to be orderly. Last week’s market showed it is anything but.

PUBLISHED ON Jun 08,2025 [ VOL 26 , NO 1311]