Taka devalued by Tk2.05 against dollar in two days

The Bangladesh Bank has devalued taka by Tk2.05 against the US dollar in two working days, a central bank senior official said, in a bid to adjust the interbank rate of the greenback.

As a result, banks had to spend Tk91.95 to buy every US dollar from the central bank on Monday.

According to the Bangladesh Bank, it sold $130 million last Thursday at a price of Tk89.90. However, in the afternoon of the same day, the dollar price was increased by Tk1.60 and fixed at Tk91.50. Later on Thursday, the central bank sold $5 million to a bank at the new price.

The central bank did not sell any dollars last Sunday. However, the dollar rose by Tk0.45 to 91.95 on Monday morning. At this price, the central bank on Monday sold $10 million as per demands from banks.

Sirajul Islam, an executive director and a spokesman for the central bank, has confirmed the information.

"We are observing the interbank exchange rate every day. It has been decided to increase the value of the dollar keeping in mind the current demand and supply of the greenback," he told The Business Standard.

"Expatriates' remittances have also declined due to the low value of the dollar. Therefore, the decision to devalue the taka against the dollar will encourage expatriates to send more remittances to the country. At the same time, our exporters will benefit from this move," he added.

The demand for the US dollar has risen sharply over the past few months as import costs have gone up due to the global crisis. In this context, the Bangladesh Bank has devalued the taka against the greenback in the last one month to keep the foreign exchange reserves strong by reducing the import cost.

In the last nine days, the central bank has reduced the value of the taka by 4.61% against the US dollar. Before May 29, the central bank used to sell dollars at Tk87.90. In means, that the taka has been depreciated by Tk4.05 against the dollar in the last nine days.

On 26 May, the central bank held a meeting with the leaders of the Association of Bankers Bangladesh (ABB) and Bangladesh Foreign Exchange Dealers Association (BAFEDA), to overcome the dollar crisis.

At the meeting, banks were asked to make daily proposals to determine the exchange rate per dollar. It was also decided that all banks there would sell dollars at the same rate (universal rate).

Later on May 29, considering the proposal of banks, the Bangladesh Bank increased the price of the dollar to Tk89. However, most banks did not comply with this rate. It has a negative impact on remittance income.

In this context, the Bangladesh Bank left the dollar exchange rate to be fixed by the market demand from the morning of 2 June. At the same time, the value of the taka against the dollar was reduced by Tk0.90 to Tk89.90.

A senior central bank official said the Bangladesh Bank usually sells dollars to commercial banks for imports of essential food items, fuel oil and other essentials. The price of all commodities in the world market is increasing, due to which the demand for dollars in the market has gone up. The central bank sold $5,948 million to banks in the current fiscal year (July-June) as of Monday.

Meanwhile, banks have also increased the opening rate of letters of credit (LCs) for imports on the news of raising dollar prices by the Bangladesh Bank and increasing demand. It is learned that the LC rate has gone up by Tk0.50 in a single day. Most of the banks have opened LCs at the rate of Tk92.50 to Tk93.

"We have opened import LCs at 92.50 per dollar since Monday morning. We have also cashed exporters' bills at Tk91.50. Besides, we have given a rate of Tk92.50 to remitters," the head of the treasury division of a leading private bank told TBS.

"The demand is still much higher than the supply of dollars. Banks are trying to manage this among themselves, but it is becoming difficult for them. Dollar support is being provided by the Bangladesh Bank," he added.

The official said that if this support is continued, the market will gradually become stable.