Taka devalued again to keep dollar market stable

The Bangladesh Bank on Monday depreciated taka by Tk0.40 re-fixing the local currency's exchange rate against the US dollar at Tk87.90 to stabilise the volatile forex market, according to sources at the central bank.

This is the third depreciation of the local currency against the greenback this May.

Till Sunday, the inter-bank exchange rate was Tk87.5, which was fixed on 16 May. On 9 May, the exchange rate had been increased by Tk0.25 to Tk86.7 from Tk86.45.

People concerned said prices of all kinds of commodities on the international market were going up because of increasing demand all over the world in the wake of improvement in the Covid situation. On top of this, the outbreak of the Ukraine-Russia war in February caused a disruption in the global supply chain, causing shipment costs to go up. This led to an increased demand for the US dollar.

As a result, like in many countries in the world, the local currency of Bangladesh also started to lose value against the dollar.

In interbank transactions alone, the taka has depreciated by more than 3% against the US dollar since April 2021. In April last, the exchange rate was Tk84.8. The rate saw a Tk0.01 increase in June, but it has been on the decline ever since.

Speaking on this, the treasury head of a private bank attributed the constant rise in dollar price to its higher demand against supply in the market.

Last week, the central bank gave a lot of dollar support to the market, which helped to bring about some stability in the market, he told The Business Standard, adding if this support is not given regularly, pressure will increase on the market.

He further said the central bank supplies dollars to the state-owned banks, especially for importing essential commodities. But since the amount is very low, the banks have to buy dollars from other banks at higher prices. Because of this, they are charging clients Tk0.3 to Tk0.5 more than their purchase price of $1 while opening letters of credit (LCs).

Even on Monday, importers had to open LCs at Tk96-97 against $1, he noted.

Meanwhile, state-owned fuel oil importer the Bangladesh Petroleum Corporation (BPC) is not getting the required amount of dollars from state-owned banks to open LCs.

On 12 April, following an inter-ministerial meeting, the BPC was told to pay the fuel oil bill by purchasing dollars at the market rate or the interbank rate.

On April 26 of the same month, the BPC informed the decision to the state-owned and private banks. 

With the inter-bank exchange rate rising, the value of paper dollars is also increasing by leaps and bounds.

On Monday, buyers had to pay Tk98.20 to buy $1 from money exchangers. Earlier, on 17 May, the price of $1 rose to Tk102 in the kerb market.

Dollars come to the kerb market mainly from expatriate workers and tourists returning from abroad. Many sell the dollars they bring with them to money exchangers. Again, foreign-bound people buy dollars from these institutions.