Bangladesh's trade competitiveness weakened slightly as the Real Effective Exchange Rate (REER) index edged higher in April, reflecting persistent inflationary pressures and an overvalued taka relative to the currencies of the country's major trading partners.
The REER stood at 102.44 in April 2026, up 0.09 percentage points from March. The latest reading suggests that the local currency remains overvalued.
Based on the April 2026 REER reading, the indicative exchange rate for the US dollar was estimated at Tk 125.87, compared with the prevailing market rate of Tk 122.87.
This implies that the taka was overvalued by around 3.0 per cent during the period.
The REER index measures the value of the local currency against a basket of currencies from 17 major trading partners that account for more than 80 per cent of Bangladesh's external trade.
A REER reading below 100 generally signals improved export competitiveness, while a level above 100 indicates a relatively stronger domestic currency, making exports less competitive and imports relatively cheaper.
Globally, in the absence of an alternative benchmark for assessing currency misalignment, policymakers use the REER as a broad indicator of an economy's equilibrium exchange rate and seek to keep it close to the 100 mark.
A senior central banker said Bangladesh's inflation remained elevated relative to that of its trading partners, which was the principal factor behind the latest trend.
He added that the ongoing conflicts in the Middle East were also contributing to the overvaluation of the local currency.
The country has faced additional inflationary pressures following recent fuel price adjustments linked to the conflict involving Iran and Israel, developments that are expected to further influence REER dynamics.
On December 31, 2024, the Bangladesh Bank allowed authorised dealers (ADs) to trade foreign currencies at freely negotiated rates.
The central bank also introduced a new foreign exchange intervention strategy and began publishing a daily reference benchmark exchange rate based on the weighted average of freely quoted market exchange rates.
In addition, ADs were instructed to report all foreign exchange transactions worth US$100,000 or more, or their equivalent, twice a day.
jasimharoon@yahoo.com