Inflation pushes REER up 1.43 points in Mar

The Real Effective Exchange Rate (REER) index rose in March, indicating Bangladesh's modest loss in trade competitiveness.
The increase was largely driven by higher inflation in the country compared with its trading partners.
REER stood at 102.78 in March 2026, up 1.43 points from February.
This means the currency remains overvalued.
The index measures the value of the local currency against a basket of 17 major trading partners accounting 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 cheaper.
Globally, in the absence of an alternative benchmark for assessing currency misalignment, policymakers treat REER as a broad indicator of an economy's equilibrium exchange rate and aim to keep it close to 100.
Based on the March 2026 REER reading, the indicative exchange rate for the dollar was estimated at Tk 126.03, compared with the prevailing market rate of Tk 122.62.
This implies an overvaluation of the Taka by around Tk 3.41, according to data released this week.
A senior central banker says Bangladesh's inflation remained elevated relative to its trading partners, which is the main factor behind the trend.
He adds that the ongoing conflicts in the Middle East are contributing to the overvaluation of the local currency.
The country has also faced rising inflationary pressures following the recent fuel price adjustments due to the war in the Middle East between Iran and US-Israel, which are expected to affect the REER dynamics further.
"The Middle East conflict has increased currency volatility for oil-dependent countries," the official says.
On December 31, 2024, the Bangladesh Bank allowed authorised dealers (ADs) to trade foreign currencies at freely negotiated rates.
The Bangladesh Bank also launched a new foreign exchange intervention strategy and began publishing a daily reference benchmark exchange rate based on the weighted average of freely quoted exchange rates from market transactions.
Additionally, ADs were instructed to report all foreign exchange transactions at or above $100,000 or its equivalent twice daily.
jasimharoon@yahoo.com