The Tk121.75 rate signals the reference rate for the USD to commercial banks, BB official says
A file photo of Bangladesh bank. Photo: BSS
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A file photo of Bangladesh bank. Photo: BSS
Highlights
- BB buys $129.5m at Tk121.75 to stabilise dollar rate
- Since July, $1.88b purchased via auctions
- Auctions support exporters, remittances, and reserves
- Experts stress stability; sudden rate changes harmful
- Dollar auctions started on 13 July to manage market liquidity
The Bangladesh Bank today (22 September) purchased $129.5 million from commercial banks through another auction at Tk121.75 per dollar in a move to maintain stability in the foreign exchange market.
This follows a similar purchase of $353 million earlier this month at the same rate. Since July, the central bank has acquired $1.88 billion through auctions.
Confirming the matter, a senior Bangladesh Bank official told The Business Standard that the Tk121.75 rate signals the reference rate for the USD to commercial banks.
Economists and bankers note that maintaining a stable dollar rate is crucial for the economy, as both sharp rises and falls can negatively impact trade and financial flows.
Currently, the auction system provides advantages for exporters and remittance recipients while allowing the central bank to bolster its foreign reserves. Economists believe the decision to buy dollars through auctions is the right tool.
Speaking to TBS, Centre for Policy Dialogue (CPD) Executive Director Fahmida Khatun said, “Purchasing dollars via auctions is an effective tool to keep the exchange rate stable, benefiting remittance inflows and exports.”
She also said, “The central bank always tries to keep the dollar market stable. Sudden fluctuations in the dollar rate can create problems for the economy. At the same time, the rate should be maintained at a level that ensures importers do not face difficulties, keeping a balanced approach.”
Fahmida emphasised that stability in the dollar rate is essential for imports, exports, and investment.
She said, “The dollar rate has been left to the market and efforts are being made to make it market-based. By purchasing dollars through auctions, the central bank is also increasing reserves. This method is used in other countries like India. When a dollar shortage arises in the market, the central bank will release dollars. This way, the market is kept relatively stable.”
“Gradual increases or decreases in the rate are fine, but sudden spikes or drops are harmful to the economy, as such changes make the market more volatile,” Fahmida added.
A treasury head of a private bank told TBS that, according to bankers, lower import demand for capital machinery has reduced overall dollar demand.
Bangladesh Bank data shows that Letters of Credit (LCs) for capital machinery imports fell by nearly 25% compared to the previous fiscal year.
According to a deputy managing director of a private bank, a year of strong remittance and export inflows has allowed banks to clear overdue import bills, especially for fuel. Now, with reduced import pressure, dollar supply is exceeding demand, which is pushing down the exchange rate.
The central bank began dollar auctions on 13 July and has since been actively purchasing foreign currency to manage market liquidity.