Birr Holds Near 160 as NBE’s Second FX Auction Shows Relief, Not Resolution

The Birr has recovered from its August slide, but continued excess demand for dollars suggests Ethiopia’s foreign exchange pressure has not disappeared.

Ethiopia’s Birr is showing signs of short-term stabilization after the National Bank of Ethiopia’s latest foreign exchange auction cleared at almost the same level as last week’s $500 million special intervention.

The NBE allocated the full $125 million offered in its second regular foreign exchange auction of the 2026/27 fiscal year on August 26, with the weighted average successful bid settling at 160.2070 Birr per US dollar. Banks submitted $170.51 million in bids, leaving $45.51 million in unmet demand.

The result marks a notable change from the first regular auction of the fiscal year on August 12. At that auction, the NBE offered the same $125 million, but commercial banks submitted $470.17 million in bids. The weighted average rate reached 161.7994 Birr per dollar.

The latest rate therefore represents an appreciation of roughly 0.98 percent, or 1.59 Birr, from the first regular auction.

The $500 Million Intervention Changed the Picture

The shift came after the NBE conducted a separate $500 million special foreign exchange auction on August 20.

The central bank fully allocated the $500 million, with 21 of 22 participating banks receiving foreign currency. However, demand still exceeded supply: banks submitted $710.14 million in bids, leaving approximately $210.14 million unfilled. The weighted average successful bid was 160.2144 Birr per dollar.

The second regular auction has now cleared at 160.2070 Birr, only 0.0074 Birr stronger than the special auction rate.

That proximity is significant. It suggests that the large intervention succeeded in pulling the auction-market exchange rate back from the nearly 162 Birr-per-dollar level recorded on August 12 and, at least for now, has helped keep the Birr around the 160 level.

But the latest auction also shows why it would be premature to interpret the movement as a resolution of Ethiopia’s foreign exchange shortage.

Demand Has Fallen, But It Has Not Disappeared

Demand for dollars was much lower in the latest auction. Banks submitted $170.51 million, compared with $470.17 million in the first regular auction and $710.14 million during the special auction.

That is a substantial decline in bidding pressure.

However, the NBE still received bids 36 percent above the amount it offered in the latest auction. In other words, even after the $500 million intervention, the regular $125 million supply was not enough to satisfy all bids.

The size of the remaining gap is smaller than in the previous auctions, but it remains a gap.

There is another striking change: participation fell from 28 banks in the August 12 auction to only five in the August 26 auction, with just two securing allocations.

The sharp decline in participation requires caution in interpreting the fall in demand. Lower bidding does not necessarily mean Ethiopia’s underlying demand for foreign currency has fallen by the same proportion. The $500 million special allocation may have reduced some immediate funding needs on commercial banks’ balance sheets, while the distribution of foreign currency across banks may also have affected who needed to participate in the latest auction.

What the Auctions Are Telling Us

Taken together, the three August interventions tell a more complicated story.

The first regular auction exposed intense dollar demand and pushed the auction rate to 161.80 Birr.

The $500 million special auction dramatically increased supply and brought the rate back to 160.21 Birr, but still left more than $210 million of bids unmet.

The second regular auction maintained that level, clearing at 160.2070 Birr, while excess demand narrowed considerably to $45.51 million.

This is evidence of improved market conditions, but not evidence that the foreign exchange imbalance has been eliminated.

The immediate question is therefore no longer simply whether the Birr can hold at 160. The bigger question is whether it can remain there without repeated large-scale NBE intervention.

The NBE has two more $125 million regular auctions scheduled for September 9 and September 23.

Those auctions could provide a better test of whether the recent stabilization is becoming durable.

Relief, But the Structural Problem Remains

The latest figures point to a central bank that has successfully created breathing room for the Birr.

Yet Ethiopia’s underlying foreign exchange challenge is larger than the exchange rate at a single auction. The continuing excess demand for dollars, the need for a $500 million special intervention, and the dependence on repeated central-bank supply all indicate that the market still has pressure beneath the surface.

For now, the Birr is holding.

The more important test will be whether it can continue holding as the size of NBE interventions normalizes and as banks return to the regular auction cycle.

For Ethiopia’s foreign exchange market, the August auctions may therefore represent stabilization, but the evidence is not yet strong enough to call it a solution.