Dollar steady at Tk122.50, experts say more time needed to realise impact
Even under the market-based system, the exchange rate is expected to fluctuate within an unofficial band

The dollar rate held steady for the second consecutive day as banks remained cautious in their transactions, following the Bangladesh Bank's directive to adopt a market-based exchange rate in line with IMF conditions.
Speaking to senior officials from several banks, it was learned that on Thursday morning, the heads of treasury departments from leading banks held an informal meeting where all participants agreed on the need to exercise caution while purchasing remittance dollars.
From the beginning of the day, banks offered a maximum rate of Tk122.50 to buy remittance dollars. The previous day (Wednesday), following the central bank's announcement of a market-based exchange rate, the rate had gone up to Tk122.80. However, with low demand and relatively higher supply of dollars, the rate dropped again.
Still, it may take more time to fully understand the impact of the policy shift, they said.
Wishing anonymity, the country head of a leading aggregator exchange house told TBS that following the announcement of the market-based exchange rate, the dollar price had initially increased by Tk0.10 to Tk0.20.
"We expected it to rise further on Thursday. However, from the morning, the dollar was trading below Tk122.50. Many banks have virtually no demand for dollars. If banks don't want to buy, it's not possible for us to charge higher rates," he said.
A deputy managing director of a private bank said, "Around $903 million in remittances came in during the first 10 days of May. We expect healthy remittance growth by the end of May, as Eid will be in the first week of June."
He said, "Besides, we are seeing good growth in exports, while imports are not increasing proportionately. That means our dollar supply is growing. Especially as domestic and foreign investments have dropped, imports related to capital machinery and raw materials have decreased significantly.
"Additionally, lower global prices of fuel and essential commodities have also reduced import costs. Overall, dollar demand is low. So, the chances of the dollar appreciating this month are slim. However, we will need to observe the market for at least another week before making any definitive comments."
Earlier on Wednesday, the Bangladesh Bank finally announced a shift to a market-based exchange rate system, allowing market participants to trade dollars at freely negotiated rates to get IMF loan confirmation.
However, there will be an undisclosed band within which the exchange rate must stay. At the same time, the Bangladesh Bank will continue to intervene in the foreign exchange market by buying and selling dollars.
Mustafizur Rahman, distinguished Fellow of the Centre for Policy Dialogue (CPD), said that the market-based exchange rate will not have a significant immediate impact on the economy.
He explained that unless there is a significant appreciation or depreciation of the taka, the impact will be minimal because currently there is little difference between the kerb market and bank dollar rates.
But if dollar demand picks up, the economist said that the central bank will decide at what rate it will intervene as a market player. At that point, the central bank will sell dollars in the market.
He emphasised two things to keep in mind: first, the state of forex reserves, and second, the level of import demand. The risk lies in how the central bank will manage if dollar demand rises sharply.
However, since the supply side of dollars is currently strong, the risk on the demand side is low. Therefore, the central bank needs to closely monitor the market and watch carefully to prevent excessive speculation, Mustafizur added.