The central bank has purchased the US dollar from the commercial banks with changed instruments in a bid to offset inflationary pressures on the economy amid a glut of money supply, officials said.
Under the latest move, the Bangladesh Bank (BB) bought the US currency from the banks Thursday with the government securities held by the central bank instead of 30-day BB bills.
"We've bought the greenback from the banks with the Bangladesh Government Treasury Bonds (BGTBs) to curb the inflation through squeezing the reserve money supply to the market," a BB senior official told the FE Sunday.
He also said the reserve money, generally known as high-powered money, always fuel inflationary pressures on the economy.
The latest BB move came against the backdrop of uptrend in inflation in the month of July due to the Eid festival.
The inflation, as measured by consumer price index (CPI), rose to 7.04 per cent on point-to-point basis in July from 6.97 per cent of the previous month.
The annual average inflation came down to 7.28 per cent from 7.35 per cent.
"We're working to bring down the inflation to the level of 6.50 per cent on 12-month average basis by the end of this fiscal year (FY) 2014-15 from the existing level," the BB official noted.
The central bank has continued purchasing the dollar from the commercial banks directly to keep the inter-bank foreign exchange (forex) market stable.
As part of the move, the BB bought US$ 30 million from a commercial bank Thursday at market rate with Five-Year and 10-Year BGTBs.
The US dollar was quoted at Tk 77.44- Tk 77.45 on the inter-bank forex market on the day against Tk 77.45- Tk 77.46 of the previous working day, market operators said.
"The commercial banks have been benefited through selling their excess dollar with the BGTBs instead of the 30-day BB bills by receiving higher yield on the risk-fee securities," another BB official explained the change.
He also said the central bank provides the BGTBs or BB bills against the purchase of dollar as per a bank's choice.
Talking to the FE, a senior treasury official of a leading private commercial bank said it may create mismatch of funds in future as long-term assets have been created against the short-term liquidity.
A total of $916 million was bought from the commercial banks between July 2 and August 14 of the FY 15 for offsetting its increased supply to the market.
The central bank purchased a record $5.15 billion from the banks in the FY 14 on the same ground.
"We're purchasing the greenback from the banks directly to protect the interests of exporters and migrant workers by keeping the exchange rate of the local currency against the US dollar stable," the BB official noted.
He also said the central bank may continue purchasing the US dollar in the near future on the basis of market requirement.
The country's foreign exchange reserves reached $22.05 billion Thursday on the back of dollar purchase.
BB buys dollar from banks with changed instrument
Siddique Islam | Published: August 18, 2014 00:00:00 | Updated: November 30, 2024 06:01:00
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