BB's dollar buys from banks hit nearly $1.0b in less than two months

As part of the move to stabilise the country's foreign-exchange market, the Bangladesh Bank's (BB) dollar purchase from commercial banks has reached almost $1-billion mark in less than two months.

With the latest interventions of buying $47.50 million more through auctions from the interbank spot market on Tuesday, the central bank has so far purchased $995.50 million since July 13 under the prevailing free-floating exchange rate arrangement.

Bankers and money market analysts said the dollar-buying move by the banking regulator is not only helping keep the dollar-taka exchange rate stable but also contributing to make its foreign exchange reserve as stronger as possible even after repayment of the upcoming ACU (Asian Clearing Union) liabilities of $1.50 billion.

Simultaneously, the purchases are also easing liquidity pressures, as the central bank injects over Tk 121 billion in exchange for dollars, according to the BB sources.

Requesting anonymity, a BB official said that they had bought $47.50 million on Tuesday under the Multiple Price Auction method, with a cutoff rate of Tk 121.75 per American greenback.

The official said the forex deals on the interbank spot market have slowed in recent days because of lower demand for foreign currencies amid a surge in supply. And it slowed the commercial bank's forex-netting drives as they were unable to sell their already-sourced dollars on the market amid low demand, the official said.

"That's the reason why the BB stepped in. This intervention will help the lenders source more forex using the liquidity it injected into the banks through such purchase," the central bank official told the FE.

Another BB official, who wishes to remain anonymous, said the government is set to clear ACU liabilities amounting to $1.50 billion by end of this week. "Despite such a large payment, we expect the gross reserve to remain over $30 billion mark."

According to BB data, the country's forex reserves rose to $31.39 billion as of September 2 from $31.19 billion recorded on August 28. By end of July, the figure was $29.80 billion.

Managing Director and Chief Executive Officer of Mutual Trust Bank PLC (MTB) Syed Mahbubur Rahman said, "The central bank probably looks to prevent the downfall in exchange rate amid lower demand and keep it stable so that the inflow of forex through exports and remittance remain unaffected. I think it's not a bad move in the short term as it will help BB bolster its forex reserves that will be very helpful once the prevailing economic sluggishness eases."

Following the BB's forex market intervention, the forex reference rate has reversed the trend after days of downturn. According to the official data, the dollar-taka reference rate was Tk 121.68 per dollar on August 28. Since then it started moving up riding on BB's dollar-buying drives. The rate hit Tk 121.86 per dollar on September 2.

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