Higher demand pushes up dollar rates in kerb market

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FE Report
The buying rate of US dollar in the informal (kerb) market was higher by Tk 3.30 Sunday than what was offered by banks.
Market insiders have attributed the hike in dollar rate in kerb market due to short supply of the greenback.
They, however, said the exchange rate of US dollar is likely to decline before the coming Eid festival.
But sources in the banking circle have expressed their concern over the impact of the huge gap in dollar rates in the kerb and formal markets on the remittance inflow through official channels.
Sources, however, said the supply of cash dollar has been interrupted because of tight vigilance by the authorities concerned, particularly at the airport, although the demand for greenback remained unchanged.
The exchange rate of US dollar normally increases in the kerb markets when substantial illegal transactions take place, the sources observed.
The Bangladesh Bank (BB) is closely monitoring the market situation but it is unable to intervene directly into the unauthorised market.
"We are informed about the higher rates of the greenback in the informal market," a BB senior official told the FE, adding that the central bank is closely watching the situation.
The treasury officials, however, urged the authorities concerned to take necessary actions immediately to check the price hike of US dollar in the kerb market.
"The inflow of remittances through the banking channel may be affected if the up trend in rates of greenback continues in the unofficial market," a senior treasury official of a private commercial bank told the FE.
The bankers also advised travellers to buy greenback from banks as it is not only cheaper but there is adequate supply also.
The greenback was sold between Tk 72.10 and Tk 72.20 in the informal market Sunday while the buying rates were between Tk 71.80 and Tk 71.90. The commercial banks, however, were selling the greenback between Tk 69.00 and Tk 69.10 while buying between Tk 68.20 and Tk 68.60.
The exchange rate of the greenback, however, remained stable in the inter-bank foreign exchange market hovering between Tk 58.50 and Tk 58.51 on the day.
The inter-bank call money rate was also steady on the day despite withdrawal of large amount of cash through reverse repurchase agreement (repo) and treasury bills, fund managers said.
The call rate in its extreme range moved between 6.50 per cent and 10.00 per cent maintaining the previous day's range.
In most deals, the rates, however, moved between 6.50 per cent and 6.55 per cent against the previous day's range of between 6.50 per cent and 6.60 per cent, they said.
Some non-banking financial institutions borrowed cash at high rates from the inter-bank market to meet urgent demands of their clients that forced the call rate to rise above the normal trend, fund managers said.
The call rate stayed above the bank rate of 5.00 per cent in all deals indicating higher than expected pressure on liquidity, fund managers said.
The central bank withdrew Tk 15.85 billion through reverse repo auctions at an interest rate of 6.50 per cent per annum.
Besides, the government borrowed Tk 8.00 billion through auctions of treasury bills. The draining out of cash created negligible impact on liquidity of the market.