Rising Euro had a telling effect on businesses
Monday, 31 December 2007
FE Report
The steady dollar-taka exchange rate throughout 2007 could not fully insulate importers of capital machinery as US dollar plunged against most major currencies in the international market, the Standard Chartered Bank (SCB) said.
"Overall Euro had appreciated around 16 per cent against Bangladesh taka (BDT) through the course of the year. Rising Euro has had telling effect on businesses involved in capital expenditures, as most of the machineries are imported from Europe," the SCB said in its yearly roundup-2007, released Sunday.
While the world currency market is still recuperating from the shock of US sub-prime crisis, soaring oil prices and geo-political turmoil, 2007 was rather a low key year for the local foreign exchange market.
"There was no major gyration in the local foreign exchange (forex) market with rates being range bound for most of the year," the roundup added.
The US dollar (USD) hovered mostly between BDT 69.00-69.50, while reaching the peak of BDT 70.93 in January 2007.
US dollar hit record lows against Euro and multi-year lows against other currencies, driven by overall slowdown in US economy coupled with weakness in the housing sector that turned into what is now known as the US Sub-prime crisis.
Rate cut by the US Federal Reserve has hurt the dollar further as investors shifted to high yielding currencies, it forecast.
"Stability of USD-BDT was challenged in the second half of 2007 when the economy had to battle with two major floods." the roundup said, adding that the demand for dollar was fuelled by higher import of food grains and petroleum in October 2007, which reached a record peak of $99.29 a barrel in the international market.
"The Bangladesh Bank (BB) facilitated the market liquidity with injection of ample funds. Since then, dollar has been extremely steady with the year end inflows of foreign aid on account of cyclone Sidr," it observed.
A positive balance of payments coupled with record wage-earners remittances also helped keep the country's foreign exchange market stable.
While both import and export registered a growth of around 15-16 per cent, remittances registered a record growth of 25 per cent to US$ 6.0 billion. The flow of remittances helped increase the foreign reserve above $5.0 billion for the first time.
On the other hand, the country's money market experienced unique calmness throughout 2007. Unlike previous years, the call money market was quite stable and apart from a few intermittent spikes, rates hovered around 6.50 per cent.
"The gaining of momentum in secondary bond trading was a major development in 2007. Activation of the Primary Dealership process by the central bank was a significant step in facilitating secondary bond trading," the SCB added.
Other major developments in 2007 include a more transparent monetary policy from the BB, introduction of two new long-term bonds of 15 and 20 year tenors, participation of an increasing number of commercial banks in the secondary bond market and increased depth in repurchase agreement (repo) and reverse repo transactions in the money market.
Steps taken by the central bank in 2006 regarding introduction of bond calendar and marking to market (MTM) of securities held for trading (HFT) started to yield benefits in 2007.
"We see a great potential for a vibrant secondary bond market in 2008," the SCB predicted in its roundup.
The steady dollar-taka exchange rate throughout 2007 could not fully insulate importers of capital machinery as US dollar plunged against most major currencies in the international market, the Standard Chartered Bank (SCB) said.
"Overall Euro had appreciated around 16 per cent against Bangladesh taka (BDT) through the course of the year. Rising Euro has had telling effect on businesses involved in capital expenditures, as most of the machineries are imported from Europe," the SCB said in its yearly roundup-2007, released Sunday.
While the world currency market is still recuperating from the shock of US sub-prime crisis, soaring oil prices and geo-political turmoil, 2007 was rather a low key year for the local foreign exchange market.
"There was no major gyration in the local foreign exchange (forex) market with rates being range bound for most of the year," the roundup added.
The US dollar (USD) hovered mostly between BDT 69.00-69.50, while reaching the peak of BDT 70.93 in January 2007.
US dollar hit record lows against Euro and multi-year lows against other currencies, driven by overall slowdown in US economy coupled with weakness in the housing sector that turned into what is now known as the US Sub-prime crisis.
Rate cut by the US Federal Reserve has hurt the dollar further as investors shifted to high yielding currencies, it forecast.
"Stability of USD-BDT was challenged in the second half of 2007 when the economy had to battle with two major floods." the roundup said, adding that the demand for dollar was fuelled by higher import of food grains and petroleum in October 2007, which reached a record peak of $99.29 a barrel in the international market.
"The Bangladesh Bank (BB) facilitated the market liquidity with injection of ample funds. Since then, dollar has been extremely steady with the year end inflows of foreign aid on account of cyclone Sidr," it observed.
A positive balance of payments coupled with record wage-earners remittances also helped keep the country's foreign exchange market stable.
While both import and export registered a growth of around 15-16 per cent, remittances registered a record growth of 25 per cent to US$ 6.0 billion. The flow of remittances helped increase the foreign reserve above $5.0 billion for the first time.
On the other hand, the country's money market experienced unique calmness throughout 2007. Unlike previous years, the call money market was quite stable and apart from a few intermittent spikes, rates hovered around 6.50 per cent.
"The gaining of momentum in secondary bond trading was a major development in 2007. Activation of the Primary Dealership process by the central bank was a significant step in facilitating secondary bond trading," the SCB added.
Other major developments in 2007 include a more transparent monetary policy from the BB, introduction of two new long-term bonds of 15 and 20 year tenors, participation of an increasing number of commercial banks in the secondary bond market and increased depth in repurchase agreement (repo) and reverse repo transactions in the money market.
Steps taken by the central bank in 2006 regarding introduction of bond calendar and marking to market (MTM) of securities held for trading (HFT) started to yield benefits in 2007.
"We see a great potential for a vibrant secondary bond market in 2008," the SCB predicted in its roundup.