The Bangladesh Taka has depreciated deeper against the US dollar in the last three consecutive working days following free float of the greenback.
Market operators said the local currency lost 3.31 per cent in value against the dollar -- rated the largest fall in three days in nearly two decades -- mainly due to higher demand for the greenback for settling import-payment obligations.
The dollar was quoted at Tk 91.95 each on the inter-bank foreign- exchange market on Monday against Tk 91.50 on the previous working day. It was Tk 89.00 on June 01.
Actually, the BDT lost its value by 3.31 per cent or Tk 2.95 on the inter-bank forex market during the period under review, according to market operators.
The local currency depreciated by Tk 0.90, Tk 1.60 and Tk 0.45 against the greenback on the inter-bank market on June 02, June 05 and June 06 respectively.
On Sunday, the BDT lost its value worth Tk 1.60 to Tk 91.50 on the inter-bank market against the US currency despite the global market having closed due to the weekend. It was Tk 89.90 on Thursday.
The higher depreciation of the local currency came against the backdrop of allowing all the authorised dealer (AD) banks to fix their exchange rates in line with the floating exchange-rate regime.
The central bank allowed the banks to fix their exchange rates individually at the opening of market on Thursday in response to their appeal for restoring stability on the country's forex market.
In the meantime, the BDT has lost its value by Tk 6.15 or 7.17 per cent since January 2022. The dollar was traded at Tk 85.80 on January 08 last.
Such depreciation of the local currency was Tk 3.20 or 3.73 per cent against the US currency until June 01 just before allowing the banks to fix their exchange rate on their own.
The same day, the local currency also depreciated similarly against the greenback at customers' level for settling import payments.
Most of the banks quoted maximum Tk 92.50 for the sale of bills for collection, generally known as BC, for settling import payments on the day to their customers, according to the central bank's latest monitoring report.
"Now it needs to intervene on both demand and supply sides for bringing stability on the country's forex market," Ziaul Hasan Siddiqui, former deputy governor of the Bangladesh Bank (BB), told the FE, without elaborating.
Talking to the FE, Dr Toufic Ahmed Chowdhury, former director- general of Bangladesh Institute of Bank Management (BIBM), said the local currency is likely to depreciate further against the greenback because the country's overall balance of payments (BoP) now stays in negative territory.
Actually, the gaping deficits in trade as well as the current account reflect the growing imbalance on the external front, thus creating mounting pressure on Bangladesh's BoP in recent months.
BB data show that the BoP posted a negative balance of $3.71 billion in the first 10 months of the current fiscal year (FY), 2021-22, against a positive balance of $7.50 billion in the same period of FY'21.
"The exchange rate of the BDT against the US currency may be stable in July," the senior economist predicts.
He urges the central bank to tighten its monitoring and supervision to bring stability through curbing forex-market manipulation.
Meanwhile, the central bank continues its foreign-currency liquidity support in a bigger way to scheduled banks for managing volatility on the market.
The BB sold US$130 million directly to 7 banks on Monday to help them meet the growing demand for the greenback. On Thursday, the central bank sold similar amount of the greenback to 4 banks on the same grounds.
The central bank has so far injected $6.34 billion from the reserves directly into the commercial banks as liquidity support for settling their import-payment obligations in the current fiscal year (FY), 2021-22.
Bangladesh's forex reserves already dropped below $42 billion again on Sunday following higher sales of the greenback from the reserves.
The reserves came down to $41.93 billion on the day from $42.10 of the previous working day, according to official figures.
Earlier on May 11, the reserves fell to $41.95 billion after the payment worth $2.24 billion to the Asian Clearing Union (ACU) against the imports of March-April period of 2022 from $44.11 billion of the previous working day.
The local currency is maintaining a depreciating mode mainly due to higher outflow of foreign exchange following 'hefty growth' in import payments compared to the inflow in the last few months.
The mismatch has resulted in widening current-account deficit in a macroeconomic imbalance that prompts the government to adopt some thrift measures and put baits on offer for netting foreign exchange to secure depleting reserves.
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