Banks avoid third currency in forex deals
Thursday, 29 November 2007
FE Report
The use of any third currency in the foreign exchange market has been stopped following the order of the Bangladesh Bank (BB) to avoid such deals.
"There was no deal in the market Wednesday using a third currency instead of the US dollar," a BB senior official told the FE.
He also said the central bank is now monitoring closely the overall interbank for eign exchange market for keeping the market stable.
Earlier on Tuesday, the central bank asked the commercial banks to avoid the use of any third currency to ensure stability in the country's foreign exchange market.
Earlier before issuance of the order, more than 50 per cent deals were made using third currencies including Euro and Pound Sterling instead of the US dollar in the foreign exchange market.
However, on Wednesday the central bank sold more US dollars as part of its ongoing move to keep the foreign exchange market stable.
The central bank sold US$ 0.5 million (5 lakh) at the prevailing market rate to a commercial bank to meet the growing demand for the greenback, official sources said.
The US dollar was quoted at Tk 68.60-Tk 68.61 in the interbank foreign exchange market Wednesday, unchanged from that of the previous working day.
The central bank has been intervening in the interbank foreign exchange market through selling the US dollar since October 29 last aiming to keep the market stable.
The central bank has, so far, sold a total of $182 million to the commercial banks as part of its ongoing market intervention.
"The rate of the US dollar against the local currency is likely to fall slightly in the near future, because the inflow of the greenback is gradually increasing in the market ahead of the ensuing Eid festival," a senior treasury official told the FE.
However, the inter-bank call money rate was steady Wednesday in the face of strong demand for cash, but sufficient liquidity in the market, fund managers said.
The call rate in its extreme range fluctuated between 6.50 per cent and 10.50 per cent maintaining the previous day's range.
In most deals, the rates, however, showed an upward trend and fluctuated between 6.60 per cent and 7.00 per cent against the previous day's range between 6.50 per cent and 7.25 per cent in the interbank market, they said.
The call rate moved above the normal trend due to borrowing of cash by some non-banking financial institutions at high rates in stray deals from the inter-bank market to meet urgent demands of their clients, fund managers said.
The market appeared experiencing higher than expected pressure on liquidity, as the call rate stayed above the bank rate of 5.00 per cent in all deals.
The central bank withdrew Tk 10.38 billion through reverse repo auctions at an interest rate of 6.50 per cent per annum.
The use of any third currency in the foreign exchange market has been stopped following the order of the Bangladesh Bank (BB) to avoid such deals.
"There was no deal in the market Wednesday using a third currency instead of the US dollar," a BB senior official told the FE.
He also said the central bank is now monitoring closely the overall interbank for eign exchange market for keeping the market stable.
Earlier on Tuesday, the central bank asked the commercial banks to avoid the use of any third currency to ensure stability in the country's foreign exchange market.
Earlier before issuance of the order, more than 50 per cent deals were made using third currencies including Euro and Pound Sterling instead of the US dollar in the foreign exchange market.
However, on Wednesday the central bank sold more US dollars as part of its ongoing move to keep the foreign exchange market stable.
The central bank sold US$ 0.5 million (5 lakh) at the prevailing market rate to a commercial bank to meet the growing demand for the greenback, official sources said.
The US dollar was quoted at Tk 68.60-Tk 68.61 in the interbank foreign exchange market Wednesday, unchanged from that of the previous working day.
The central bank has been intervening in the interbank foreign exchange market through selling the US dollar since October 29 last aiming to keep the market stable.
The central bank has, so far, sold a total of $182 million to the commercial banks as part of its ongoing market intervention.
"The rate of the US dollar against the local currency is likely to fall slightly in the near future, because the inflow of the greenback is gradually increasing in the market ahead of the ensuing Eid festival," a senior treasury official told the FE.
However, the inter-bank call money rate was steady Wednesday in the face of strong demand for cash, but sufficient liquidity in the market, fund managers said.
The call rate in its extreme range fluctuated between 6.50 per cent and 10.50 per cent maintaining the previous day's range.
In most deals, the rates, however, showed an upward trend and fluctuated between 6.60 per cent and 7.00 per cent against the previous day's range between 6.50 per cent and 7.25 per cent in the interbank market, they said.
The call rate moved above the normal trend due to borrowing of cash by some non-banking financial institutions at high rates in stray deals from the inter-bank market to meet urgent demands of their clients, fund managers said.
The market appeared experiencing higher than expected pressure on liquidity, as the call rate stayed above the bank rate of 5.00 per cent in all deals.
The central bank withdrew Tk 10.38 billion through reverse repo auctions at an interest rate of 6.50 per cent per annum.