The Bangladesh Taka (BDT) has further depreciated significantly against the US dollar mainly due to higher demand for the greenback for settling import-payment obligations.
The local currency lost its value by 40 paisa in the inter-bank foreign-exchange (forex) market on Monday, just after one week of a similar fall, according to market operators.
The US currency was quoted at Tk 87.90 each on the day against Tk 87.50 on the previous working day. It was Tk 86.70 one week before.
Earlier on May 16, the BDT depreciated by 80 paisa or 0.92 per cent to Tk 87.50 in the inter-bank market from 86.70 of the previous working day.
In the meantime, the local currency lost its value by Tk 2.10 or 2.45 per cent since January 2022. The dollar was traded at Tk 85.80 on January 08 last.
On the same day, the exchange rate of local currency also depreciated similarly against the greenback at customers' level for settling import payments.
The US dollar was quoted at a maximum of Tk 88.00 each for the sale of bills for collection, generally known as BC, on the day against Tk 87.60 of the previous level.
Some banks, however, traded the US currency ranging between Tk 95.50 and Tk 96.50 for settling import-payment obligations of their customers, according to the operators.
They also said cash dollar also traded at Tk 98.00 on the day instead of Tk 99.00 of the previous working day at the open market, commonly known as kerb market.
On the other hand, banks quoted dollar at Tk 87.00 on the day against Tk 86.60 on the previous working day to remitters for clean telegraphic transfer (TT) of their funds.
"The local currency depreciated further to adjust the mismatch between inflow and outflow of the foreign exchange in the market," a senior official of the Bangladesh Bank (BB) told the FE while explaining the latest situation.
Actually, Bangladesh's forex market is still facing a big mismatch between inflow and outflow of foreign exchange despite higher export earnings in recent months, according to the operators.
They also said the demand for the US currency increased recently mainly due to higher prices of essential items, including fuel oils, on the global market following the ongoing Russia-Ukraine war.
Meanwhile, the central bank has expedited its foreign-currency liquidity support to the scheduled banks to manage the volatility.
As part of its move, the BB sold $130 million directly to one state-owned commercial bank (SoCB) along with three private commercial banks (PCBs) on Monday.
"We may provide such liquidity support to the banks continuously in line with the market requirement," the BB official told the FE.
The central bank has so far sold $5.63 billion from the reserves directly to the commercial banks as liquidity support for settling their import-payment obligations in the current fiscal year (FY), 2021-22.
Bangladesh's reserves have been maintaining a falling trend in recent months following higher import payments alongside lower flow of inward remittances.
The country's reserves fell to $41.95 billion on May 11 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.
However, the forex reserves rose to $42.33 billion on Monday from $42.23 billion on the previous working day, according to official figures.
The BDT's latest depreciation came against the backdrop of higher outflow of foreign exchange following 'hefty growth' of import payments compared to the inflow in the last few months, the operators and economists explained.
"The mismatch in the market should be adjusted through gradual depreciation of the local currency against the US dollar," Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (InM), tells the FE while replying to a query.
Mr Mujeri, also a former chief economist of the BB, said it should not be wise to artificially manage the exchange rate of the BDT against the US currency.
The senior economist also urged the central bank to revisit its monetary policy stance if necessary for curbing inflationary pressure on the economy.
Talking to the FE, a senior market operator said the exchange rate of the local currency against the US dollar should be re-fixed in line with the real effective exchange rate (REER) gradually.
He also said import of luxurious items should be suspended temporarily to ease pressure on the country's forex market.
"Depreciation of the local currency will help boost export earnings as well as remittance inflow," head of treasury at a leading PCB said.
"But imports will be costlier in the near future following such depreciation of the BDT against the greenback," he added. "It may fuel inflationary pressure further on the economy."
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