Taka depreciates marginally in '08

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FE Report
Bangladesh taka (BDT) depreciated marginally, 0.5 per cent, against the US dollar in 2008 following the rise in the latter's demand in the domestic market.
"During the first half of 2008, the soaring global commodity prices raised the import bills of our country significantly," the Citibank NA said, adding: "Despite that due to strong remittance and export growth, BDT actually appreciated marginally in the first seven months of 2008."
BDT was traded at Tk 68.48 against US$ by the end of July, 2008. However, starting from August 2008 the local currency started to depreciate marginally. By the end of 2008, BDT was traded at 68.92 against US$ which means BDT depreciated by only 0.5 per cent year-on-year from the opening level of 2008.
Compared to those of the previous four years, exchange rates between BDT and US$ were fairly stable in 2008, the US-based Citibank NA said in its annual market update 2008, released Saturday.
In 2007, there was a Tk 1.92 difference between the yearly high (70.40) and the yearly low (68.48) in the exchange rate of taka against the greenback. US$ traded within a Tk 6.75 range (66.20 - 72.95) in 2006.
"We observed similar scenario in 2005 (61.50 - 67.0) and 2004 (59.01 - 62.50)," the bank added.
The annualised realised volatility of US$/BDT in 2008 is just below 0.20 per cent, the update said, adding that December which was the most volatile month of the year had an annualised volatility of less than 2.0 per cent.
In fiscal 2007-2008, import grew by 27.56 per cent. At the same time 15 per cent growth in export and 32.8 per cent growth in import helped BDT to post a modest gain against US$.
"Despite across the board increase in commodity prices, the foreign exchange reserve continued to remain above US$ 5.0 billion. Stable foreign exchange reserve also reflects the strong export and remittance growth in Bangladesh in 2008 with a sustainable momentum," the Citibank noted.
Market operators, however, said the depreciation of BDT started mostly since October 19 last following increase in demand for the US currency in the inter-bank foreign exchange market to settle import payment bills against petroleum products, fertiliser and food grains.
On October 19 last, the US dollar was quoted between Tk 68.52- Tk 68.54 in the inter-bank foreign exchange market against Tk 68.52 on the previous working day.
US dollar was traded at Tk 68.92 in the foreign exchange market Wednesday unchanged from the previous working day, they added.
On the other hand, the inter-bank call money rate dived sharply earlier this year as the credit growth slowed down. The rates traded as low as 1.50 per cent in January.
However, overnight the rate started to pick up with the growth of credit in the later part of first quarter, according to the update.
Overnight rates hovered around 8.00 per cent from March until the mid of June of 2008. However, the rates again moved down towards 6.00 per cent as the market experienced ample liquidity in the third quarter and earlier part of fourth quarter of 2008.
"Because of surplus liquidity, the overnight rates remained soft even during the Eid-ul-Fitr festival. Usually overnight rate shoots up during the Eid festival because of large of amount cash withdrawals from the banking sector," it added.
During the early part of December the overnight rate slightly moved up and was again trading around 8.00 per cent. In the second week of December the rates moved up above 10 per cent.
This rise in rate was fueled by large scale of cash withdrawals from the banking sector before the Eid-ul-Azha festival the country.