BB asks banks to avoid use of third currency in forex market
Wednesday, 28 November 2007
Siddique Islam
The central bank of Bangladesh has asked the commercial banks to avoid the use of a third currency to ensure stability in the country's foreign exchange market, official sources said.
The Bangladesh Bank (BB) has taken the move against the backdrop of the rising trend of using a third currency instead of the US dollar recently in the foreign exchange market.
"We have asked the banks not to use any third currency," BB Governor Salehuddin Ahmed told the FE after the meeting of bankers held at the central bank Tuesday.
He also said the central bank is closely watching the overall market situation to keep the market stable.
During the last few weeks 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.
Customers, particularly the importers, have to pay more due to use of a third currency, which was a major cause of price escalation of imported commodities in the local market, sources said.
The banks sold the US dollar at over Tk 69.00 when making the deals in third currencies.
But the US dollar was quoted at Tk 68.60-Tk 68.61 in the interbank foreign exchange market Tuesday against Tk 68.61 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 $181.50 million to the commercial banks as part of its ongoing market intervention.
Treasury officials, however, welcomed the BB's move, saying that stopping the use of a third currency will help importers because of receiving the greenback from banks at lower rates that may also help bring a positive impact on prices of imported commodities.
"We did not want such deals in the foreign exchange market to protect national interest," a senior treasury official of a commercial bank told the FE.
The central bank of Bangladesh has asked the commercial banks to avoid the use of a third currency to ensure stability in the country's foreign exchange market, official sources said.
The Bangladesh Bank (BB) has taken the move against the backdrop of the rising trend of using a third currency instead of the US dollar recently in the foreign exchange market.
"We have asked the banks not to use any third currency," BB Governor Salehuddin Ahmed told the FE after the meeting of bankers held at the central bank Tuesday.
He also said the central bank is closely watching the overall market situation to keep the market stable.
During the last few weeks 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.
Customers, particularly the importers, have to pay more due to use of a third currency, which was a major cause of price escalation of imported commodities in the local market, sources said.
The banks sold the US dollar at over Tk 69.00 when making the deals in third currencies.
But the US dollar was quoted at Tk 68.60-Tk 68.61 in the interbank foreign exchange market Tuesday against Tk 68.61 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 $181.50 million to the commercial banks as part of its ongoing market intervention.
Treasury officials, however, welcomed the BB's move, saying that stopping the use of a third currency will help importers because of receiving the greenback from banks at lower rates that may also help bring a positive impact on prices of imported commodities.
"We did not want such deals in the foreign exchange market to protect national interest," a senior treasury official of a commercial bank told the FE.