Local-currency taka slipped to its record low Wednesday in exchange with the US dollar as the rate in banks rose to Tk 109.50, signifying that imports will be more expensive.
The taka depreciated nearly 16 per cent on a year-on-year basis as the interbank dollar rate was Tk 94.7 per dollar.
The interbank dollar market is believed to be benchmark for determining other market rates, for example, the kerb market.
Under such weaker local currency, the import cost goes up, leading to rise in prices of commodities on the domestic market. And it will also impact the manufacturing sector adversely, economists say.
Although it is believed that the export and remittance may be boosted by the sharp depreciation of the local currency, but many analysts say Bangladesh's main manufacturing sector - RMG-depends on imported raw materials, meaning that their costing will be going up.
On the other hand, many expatriate Bangladeshis prefer sending money through informal channel.
According to the statistics of Bangladesh Bank (BB), the country's central bank, the volatile American currency traded at Tk109.50 on Wednesday (August 02).
The previous highest dollar rate was Tk 109, traded within the banks, on the previous day.
"We believe that this rise is due to recent upward revision of the exchange rate by foreign-currency association," one central banker told the FE, wishing not to be quoted by name.
Bankers said the interbank dollar rate has risen mainly due to an increase in remittance and export rates as part of the central bank's move to reach a market-driven exchange rate.
On July 31, the Association of Bankers Bangladesh (ABB) and Bangladesh Foreign Exchange Dealers' Association (BAFEDA) raised the dollar rate by Tk 1.0 for exporters and Tk 0.50 for remitters.
With the latest revision, the exporters are availing Tk 108.50 while remitters are getting Tk 109 per dollar from this month.
Seeking anonymity, a BB official said the forex dealers and banks very recently raised the exchange rate for the US dollar and it is basically reflected in the interbank rate.
The official terms the interbank exchange rate very important as through this a bank borrows the greenback from others to meet their import-payment obligations.
According to the central banker, the exchange rate for import is fixed by adding Tk 1.0 to the weighted average between rates of export and remittance.
When contacted, Managing Director and Chief Executive Officer of BRAC Bank Limited Selim RF Hussain said the commercial banks are trading the greenback through interbank mechanism on a limited scale mainly because of the forex dearth.
"The forex situation in the banks is slowly improving because of the controlled environment for import, which is needed to protect the falling forex reserves under the current macroeconomic situation," says the banker.
Asked about quick rebound of the forex situation, Mr Hussain, also the ABB chairman, said: "It takes time."
Such revision would help lessen pressure on the falling forex reserves, which stood at US$ 29.68 billion on July 26 last by official count. In accordance with IMF's BPM6 version, the gross volume of reserves was $23.30 billion during that aforementioned time.
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