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Taka weakens against dollar, substantially

FE Report | May 16, 2018 00:00:00

The Bangladesh Taka (BDT) has fallen considerably against the US dollar as the demand for the greenback grew to meet import payment requirements.

The local currency weakened by 50 poisha in a single day in the inter-bank foreign exchange (forex) market on Tuesday, according to traders.

The US dollar was quoted at Tk 83.60 each in the inter-bank forex market on the day against Tk 83.10 of the previous working day, they said.

"Such depreciation may help bring dynamism to the inter-bank market, which was almost non-functional in the last 10 months," a senior official of the Bangladesh Bank (BB) told the FE.

There were limited transactions in the inter-market spot market in recent months.

He also said the depreciation would not affect the prices of importable commodities directly in the market.

"India, Pakistan and Sri Lanka have recently depreciated their currencies against the US dollar significantly to foster competiveness on the global market," the central banker noted. Senior treasury officials, however, said that such depreciation may not able to boost the inter-bank forex market as most of the banks are not interested in selling their US dollar at lower rate.

"There is still a gap between the inflow and outflow of the foreign exchange in the market," a treasury official of a leading private commercial bank told the FE.

He also said the banks were not bound to sell their US dollar in the inter-bank market unless NOP (Net Open Position) limit is breached. The limit had been set by the central bank earlier. The US currency also lost its value by five poisha for importers, which will slightly push up the prices of importable products in the market, traders said.

The exchange rate of the US dollar rose to maximum Tk 83.70 for sale of Bill for Collection (BC) selling for importers on the day from maximum Tk 83.65 of the previous working day. The BDT may get weakened against the US dollar for remitters and exporters in the coming days after such weakening, the treasury official said.

The banks quoted US dollar at maximum Tk 82.70 for those who use telegraphic transfer (TT) for their funds.

Meanwhile, the central bank has continued its foreign currency support to the banks help those meet import payment obligations particularly for food grains, fuel and capital machinery.

As part of the move, the BB sold US$24 million directly to seven commercial banks Tuesday to meet the growing demand for the greenback in the market.

"We've sold the US currency to the banks at market rate for making their import payment bills," another BB official told the FE.

He also said that the central bank may continue such foreign currency support to the banks as required by the market.

The central bank has resumed providing the foreign exchange support in the recent months through selling of the US currency to the banks directly to keep the market stable.

It has sold $ 2.04 billion since July 01 of the fiscal year 2017-18 to the commercial banks as part of its ongoing support, according to BB's latest data.

The demand for the US dollar is gradually increasing, mainly due to higher import payment pressure, particularly of capital machinery, petroleum products and food items, traders said.

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