Forex auctions may reduce Birr liquidity

The new forex auction system is expected to ease the pressure on banks to acquire dollars before the October 13 deadline. However, analysts note that wholesale forex supply will not immediately translate to lower retail market prices. An auction of 140 million dollars at the current rate of approximately 161 Birr per dollar would remove 22.5 billion Birr from circulation. This significant drainage of Birr liquidity is expected to make bidding capacity a critical factor in future market dynamics. The outcome of the first auction will provide clearer signals regarding market trends.