The Bangladesh Taka (BDT) is going to depreciate further by 1.25 per cent against the US dollar (US$), as the central bank has decided to allow the depreciation for reining in volatility of the forex market.
The local currency is set to lose its value by Tk 1.10 against the US$ in the inter-bank foreign exchange (forex) market, which will come into effect from today (Monday), a top central banker said to the FE.
The US currency will be quoted at maximum Tk 89.00 each in the inter-bank on the day against the existing level of Tk 87.90.
"We've taken the decision in line with the Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers' Association (BAFEDA) proposals," Md Serajul Islam, the Bangladesh Bank (BB) spokesperson, told the FE on Sunday.
Earlier on the day, the ABB and the BAFEDA formally suggested the central bank to let the local currency depreciate further by nearly Tk 2.0 against the US dollar to manage the intractable foreign-exchange market.
"We feel that the current pressure or mismatch is more short-term, and we would request the BB to continue the policy, rate guidance and other supports, which will ensure our strong position in the global world," the trade-bodies said in their letter.
Ataur Rahman Prodhan, chairman of the BAFEDA, and Selim R F Hussain, chairman of the ABB, signed the letter jointly.
"It may not be enough to meet the market requirement," a senior member of the BAFEDA told the FE - while commenting on the fresh exchange rate of the local currency against the greenback.
The BDT exchange rate is also set to depreciate similarly against the greenback at the customers' level for settling import payments.
The US dollar will be quoted at maximum Tk 89.15 each for the sale of bills for collection, generally known as BC, particularly for importers on Monday, against the existing level of Tk 88.00.
On the other hand, the banks may allow quoting dollars at Tk 88.15 on the day against the existing level of Tk 87.00 to remitters as well as realised export proceeds or telegraphic transfer (TT) clean of their funds.
However, all the authorised dealer (AD) banks may offer the exchange rates to the overseas exchange houses - engaged in remitting money for receiving remittances from abroad - considering the BC selling as well as inter-bank rates.
Earlier, the central bank asked the bankers to quote exchange rates to the overseas exchange houses after applying due diligence and considering the situation of the inter-bank forex market.
"It's an intervention by the central bank - to bring back stability in the forex market," Md Nurul Amin, former chairman of the BAFEDA, told the FE.
The US dollar is not a commodity, rather it's a standard and medium of exchange.
The senior banker also urged the BB to expedite its monitoring and supervision to ensure stability in the market.
Shah Md. Ahsan Habib, Professor at the Bangladesh Institute of Bank Management (BIBM), said the uniform rate has been fixed temporally towards the market direction, which is necessary to ensure discipline in the market, where there are unusual multiple rates.
BDT is set to lose its value by Tk 3.20 or 3.73 per cent in the slide since January 2022, if the local currency depreciates in line with the BB's decision.
In the meantime, the local currency has lost its value by Tk 2.10 or 2.45 per cent during the period under review. The dollar was traded at Tk 85.80 on January 08.
The BB may continue its foreign-currency liquidity support to the banks to manage the ongoing volatility in the market, another central banker said.
The BB has so far sold $5.83 billion from the reserve directly to the commercial banks as liquidity support for settling their import-payment obligations in the current fiscal year (FY), 2021-22.
Bangladesh's forex market sees volatility mainly due to higher outflow of foreign exchange following a hefty growth in import payments compared to the inflow in the last few months.
Currently, Bangladesh is maintaining a floating exchange-rate regime, where the currency price is set by the forex market - based on supply and demand relative to other currencies.
The country adopted a floating exchange-rate regime in May 2003 as part of a comprehensive medium-term economic programme to promote growth and alleviate poverty.
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