Business Report:
Despite implementation of market-based exchange rate, the US dollar price for import Letter of Credit (LC) has remained stable at around Taka 122, sources said.
Bangladesh Bank (BB) finally announced a shift to a market-based exchange rate system on Wednesday,, allowing market participants to trade dollars at freely negotiated rates to get IMF loan confirmation.
To this end, the treasury head of commercial banks held an informal meeting on Thursday and decided to trade foreign currency at Taka 122.
A treasury head of a bank said preferring anonymity that treasury head of around 50 banks participated yesterday’s virtual meeting and they have taken decision to sell dollar for import LC at Taka 122.
They are also offering dollar rate for remittance at Taka 122, he added.
He said banks have available dollar liquidity as remittance inflow is high ahead of Eid and there they did not observe any foul play from aggregators on the day.
On the market-based exchange rate, BB Governor Ahsan H Mansur at a press conference on Wednesday expressed the hope that it would be around the existing rate as liquidity in the foreign exchange market is increasing due to a rise in the inflow of US dollars.
“Bangladesh’s economy is doing well. The current account deficit is manageable, and our reserves have risen without external support. We believe the time is right. I expect the rate to remain stable due to strong inflows from exports and remittances,” he added.
The governor said it does not mean the dollar can be sold at any price. “We expect the rate to hover around the current level,” he noted.
However, he said, there will be an undisclosed band within which the exchange rate must stay.
Earlier the Dollar price becomes unstable for long in Bangladesh.
Then BB takes various measures to contain it.
BB tried to keep the exchange rate of the taka and the US dollar more flexible in line with suggestions of International Monetary Fund (IMF on last December.
Then there was a crawling peg exchange rate system in place and banks are allowed to buy and sell US dollars freely at a mid-range of Tk 117.
The crawling peg is a system of exchange rate adjustments in which a currency with a fixed exchange rate is allowed to fluctuate within a band of rates.
Introduced in May of last year, this new system was not fully based on the market.
Though this new system was in place, the majority of the country’s banks are now buying and selling each US dollar for over Tk 124.
A visiting delegation of the IMF emphasised the need for a flexible or market-based exchange rate during a meeting with senior officials of the central bank at that time.
After the meeting, Husne Ara Shikha, executive director and spokesperson of the central bank, said that the IMF team suggested that Bangladesh introduce a market-based exchange rate system.
She said the central bank would issue a circular soon in this regard as per the IMF suggestion.
Another official of the central bank said the BB has plans to publish a reference rate for foreign currencies based on daily bidding rates provided by banks.
