Staff Reporter :
The US dollar price surged in the kerb market on Thursday, reaching Tk 125, just a day after the Bangladesh Bank implemented a crawling peg exchange rate system. This follows the central bank’s decision on Wednesday to devalue the taka by Tk 7, setting the Crawling Peg Mid-Rate (CPMR) at Tk 117 per US dollar.
Market participants attributed the price hike to increased demand for US dollars amid concerns about potential further devaluation.
“People have increased their purchase of the American greenback because of a possible price hike in future,” said market insiders.
Open market dollar trader Sumon Ahmed echoed this sentiment, stating, “The dollar market has heated up. There is acute shortage of dollar. Everyone wants to buy cheap dollars from customers. But no trader is selling it below Tk125.”
“Dollars are not available in the market as per demand,” reported Sumon. Another trader, Imran Gazi, highlighted the buying pressure, saying, “Even the customers have no dollars to sell now. I’m willing to pay Tk121 per dollar if anyone’s interested in selling.”
Some money changers, like Helal Uddin from Motijheel, expressed reservations about trading at the higher rates due to potential legal repercussions. “If we trade USD at higher rates, law enforcement agencies will fine us,” Helala remarked.
“There is no dollar to sell,” remarked one operator, highlighting the scarcity. When pressed on the selling price, he simply stated, “The rate can be fixed later,” reflecting the market’s uncertainty.
The impact extended to official channels as well. Banks raised their US dollar rates for opening Letters of Credit (LCs). “Some banks have raised the rate by Tk 3-4 from the previous rate,” industry sources reported. Before the crawling peg system, the official US dollar rate for LC opening stood at Tk 110, with banks typically charging between Tk 114-115.
The taka’s devaluation is not a recent phenomenon. Over the past two years, the Bangladeshi currency has lost a staggering 36% of its value against the dollar, rising from Tk 86.45 to Tk 117. Official exchange rate data reveals a steady decline, with the taka standing at Tk 94.7 in July 2022 and Tk 84.8 in July 2021.
Economists attribute the foreign exchange market’s imbalance to several factors, they say that Bangladesh’s foreign exchange reserves have been steadily dropping, reaching $19.9 billion on May 2nd, according to International Monetary Fund (IMF) guidelines. They further added that remittance inflows, a crucial source of foreign currency for Bangladesh, have witnessed a decline, export earnings remain stagnant, further limiting dollar inflows.
“Prevalence of informal ‘hundi’ market, where unofficial currency exchange takes place, disrupts the formal market and exacerbates the crisis,” added the experts.
However, the Bangladesh Bank has attempted to stabilize the market by selling dollars to commercial banks. Over the past 34 months, the central bank has injected more than $32.8 billion into the system with $11.67 billion allocated to banks in July-April of FY24, $13.5 billion in FY23 and $7.62 billion in FY22.