After months of a regulated stability, Bangladesh's foreign-exchange market suddenly starts heating up with exchange rate recording nearly a 30-paisa rise in a day, sources say.
Officials and bankers cite the Mideast war as the major hiker, as the big firepower triangular clashes over Iran issues sends out meltdown on trade and remittance.
They said the taka-greenback exchange rates had risen on the market for the last couple of days but the major hike was observed Monday when the rate reached Tk 122.80 a dollar from Tk 122.55 a day before, according to the market players.
The abrupt rise has also largely impacted the reference rate of the Bangladesh Bank (BB) as it shot up to Tk 122.55 a dollar at 5.00pm on Monday from Tk 122.38 recorded at the end of business hours a day before.
Although the banking regulator and market players pinpointed few factors behind such unusual upswing like pressure of settling UPAS (Usance Payable at Sight Letter of Credit) obligations by importers, the pending government LC payments and BB's growing forex purchase in recent days from the market put NOP (net open position) of many banks in short positioning.
Some of the bankers also blamed exchange houses, saying that they stepped up to create artificial crisis on the forex market to cash in on the volatile situation.
Seeking anonymity, a BB official said the US-Iran conflict appears to be creating a tendency among customers to settle UPAS obligation earlier and take forward cover to hedge risks, resulting in short positioning for banks.
"To overcome this short position," he says, "the commercial banks are increasing forex demand, putting additional pressure on the exchange rate."
The central banker also cited pending government import LC payment due on the day. As a result, the exchange rate is moving higher, currently around Tk 122.60 a dollar.
Considering the demand spikes of the American greenback, the BB official also informed that the banking regulator paused buying US dollars from the banks as part of its market-intervention strategy to keep the exchange rate stable since March 02 last.
A senior banker of a private commercial bank says the global price of petroleum products keeps rising as a spillover effect of the ongoing war in the Middle East and it impacts the exchange rate.
As the taka-dollar exchange rate keeps rising, he says, the importers are in desperation to pay their overseas bills as quickly as possible to avert possible exchange-rate volatility in the coming years through UPAS, resulting in short positioning for several banks.
"Suddenly we have overseas-payment obligation this week. So, we have no other option but to source dollars from the market. I think this demand surge may cause the sudden price hike on the market," the treasury head of a private commercial bank told the FE.
The senior banker defines that banks which have higher foreign-currency-payment obligations than the forex earnings are in the category of short positioning.
On the other hand, the banker says, there are some banks which have more foreign earnings than the spending to clear overseas transactions. They are in the category of long positioning. It means the banks have surplus in foreign exchange. "We purchased dollars from remitters as high as at Tk 122.70 a dollar."
However, says the exchange rate for bills for collection (BC) is much higher as banks have been charging importers in-between Tk 122.60 and Tk 122.80 a dollar.
Some bankers smelled syndication of exchange houses to raise the rate through creating artificial crisis on the market.
Bangladesh Bank, as part of its market-intervention strategy, has purchased $5493 million ($5.50 billion) from the banks so far since July 13 last to prevent freefall of exchange rate on the forex market.
However, the price of US dollar also gone up remarkably on the kerb market with the rate enhanced to over Tk 125.50 a dollar on Monday, according to the moneychangers.
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