Cenbank verbally caps remittance dollar rate at Tk122.90 for banks

The Bangladesh Bank has verbally set a ceiling on the exchange rate at which commercial banks can buy and sell US dollars.

Today (13 April), banks were instructed to sell dollars in the interbank market at a maximum rate of Tk122.70, while remittance inflows from exchange houses can be bought at up to Tk122.90, according to a senior central bank official.

The central bank has also asked banks to lower their BC (bills clean/selling) rates. On Monday, banking channel selling rates ranged between Tk123.25 and Tk123.50.

The move follows a recent meeting between Bangladesh Bank Governor Md Mostaqur Rahman and the Association of Bankers, Bangladesh (ABB), where it was noted that some banks had been buying remittances at higher-than-expected rates.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said stability had returned to the dollar market without intervention. He noted that banks are currently in a strong Net Open Position (NOP), and market conditions do not justify a rise in dollar prices.

He added that past volatility in the dollar market has made stakeholders cautious, but at present, there is sufficient dollar supply, making intervention unnecessary.

A senior official from a private bank said a few banks purchasing dollars at higher rates had pushed up prices, although market fundamentals did not warrant such increases. Strong remittance inflows and adequate supply have kept the market stable.

Another banker noted that banks that bought remittances at Tk123 would not be willing to sell at Tk122.70 in the interbank market, suggesting the central bank aims to strengthen interbank transactions. However, he cautioned that excessive intervention may not be appropriate.

Forward booking rises, spot market demand declines

Dollar rates have been rising since tensions escalated in the Middle East. At the same time, uncertainty over remittance flows has prompted many expatriates to send larger amounts home. As a result, Bangladesh recorded nearly $4 billion in remittances in March – the highest ever – partly driven by favourable exchange rates.

However, bankers warn that prolonged conflict could disrupt remittance inflows in the future. Anticipating potential dollar shortages and price hikes, many banks have increased forward bookings.

Forward booking allows businesses to lock in exchange rates in advance for future transactions, helping them hedge against currency volatility. Typically, forward rates are slightly higher than current spot rates.

Bankers say demand for forward dollars has increased significantly since the conflict began, particularly for import payments due in the next three to six months. Businesses are locking in current fixed rates now to avoid higher costs later if the taka depreciates further or the dollar supply tightens.

At the same time, the central bank is discouraging excessive forward booking, especially where banks source dollars from the spot market for forward contracts.

Officials noted that forward booking demand was relatively low just a few months ago, but has surged since the onset of geopolitical tensions, while spot market demand has declined.

A senior banker said the central bank's objective is to contain inflation by keeping the dollar rate within a manageable range. With strong dollar inflows, the regulator aims to maintain stability so that even if global oil prices rise, domestic inflation remains under control.

He described the new rate cap as a form of "verbal intervention," adding that banks which previously bought dollars at higher rates are unlikely to participate in interbank trading at lower prices, as banks generally avoid incurring losses in foreign exchange transactions.