FE Report (February 03, 2011)
Bangladesh Taka (BDT) depreciated by over 2.50 per cent against the US dollar in the last one month at customer level, which also might contribute to rise in general prices further, treasury officials said.
The US dollar was quoted at Tk 73.0992 Wednesday for bills for collection (BC) selling for opening letters of credit (LC) against imports. It was at Tk 71.2763 on December 30 last, according to the Bangladesh Foreign Exchange Dealers Association (BAFEDA) statistics.
The third currency, popularly known as cross currencies, practices increased recently that also pushed the rate of greenback in the country's foreign exchange market.
The US dollar was quoted at Tk 71.15 Wednesday in the inter-bank foreign exchange market while the rate of greenback reached between Tk 73.25 and Tk 73.30 through third currieries route, they added.
"Most of the banks now prefer to deal with Euro or Great Britain Pound (GBP) instead of US dollar for making higher profit from the transactions," a treasury official of a leading private commercial bank told the FE.
He also said the banks are making their cross currencies deals in line with the existing core risk management guidelines, introduced by the central bank earlier.
The central bank earlier identified six core risk areas in the country's banking sector.
The risk factors are credit, asset and liability, foreign exchange, information technology, internal control and compliance, and money laundering.
Major foreign currencies like US dollar, Euro, Pound Sterling and Japanese Yen are frequently being transacted in the inter-bank foreign exchange market, they added.
"The supply of greenback in the market declined since December last due mainly to higher import payments, particularly for fuel oils, food grains and power plant equipment," another treasury official said.
The country's imports grew by nearly 40 per cent during the first half of the current fiscal over that of the corresponding period of the last fiscal.
LCs against imports worth US$ 15.001 billion were settled during July-December period of fiscal 2010-11 compared to $10.717 billion in the corresponding period of fiscal 2009-10.
Pressure on foreign exchange reserve has increased gradually due mainly to higher import payments, the central bank officials said, adding that the country's foreign exchange reserve came down to US$10.381 billion Wednesday from $10.440 billion of the previous day.
"Some banks are making payment against their import bills using their customers' deposited US dollar," another treasury official said, adding there is no alternative way for the banks right now to settling such import obligations.
Most of the banks are facing deficiency in their net foreign exchange position indicating short supply of the greenback in the market, a senior official of the Bangladesh Bank (BB) said.
"We've asked eight commercial banks to maintain their net open position (NOP) limit of the foreign exchange properly for avoiding any risk," the BB official told the FE, adding the banks have already exceeded their NOP limit, fixed by the central bank earlier.
The central bank will take measures to discourage imports of less essential items aiming to minimise mismatch between demand and supply of the greenback in the market.
"We'll take effective measures in this connection in line with our new monetary policy," an executive director of the BB told the FE, adding that the central bank would give necessary instructions to the banks for implementation of the monetary policy.
On Sunday last, the central bank unveiled its half-yearly monetary policy that aimed at keeping inflation rate at around 7.0 per cent by the end of this fiscal through discouraging credit flow to unproductive sectors.
The US dollar was quoted at Tk 73.0992 Wednesday for bills for collection (BC) selling for opening letters of credit (LC) against imports. It was at Tk 71.2763 on December 30 last, according to the Bangladesh Foreign Exchange Dealers Association (BAFEDA) statistics.
The third currency, popularly known as cross currencies, practices increased recently that also pushed the rate of greenback in the country's foreign exchange market.
The US dollar was quoted at Tk 71.15 Wednesday in the inter-bank foreign exchange market while the rate of greenback reached between Tk 73.25 and Tk 73.30 through third currieries route, they added.
"Most of the banks now prefer to deal with Euro or Great Britain Pound (GBP) instead of US dollar for making higher profit from the transactions," a treasury official of a leading private commercial bank told the FE.
He also said the banks are making their cross currencies deals in line with the existing core risk management guidelines, introduced by the central bank earlier.
The central bank earlier identified six core risk areas in the country's banking sector.
The risk factors are credit, asset and liability, foreign exchange, information technology, internal control and compliance, and money laundering.
Major foreign currencies like US dollar, Euro, Pound Sterling and Japanese Yen are frequently being transacted in the inter-bank foreign exchange market, they added.
"The supply of greenback in the market declined since December last due mainly to higher import payments, particularly for fuel oils, food grains and power plant equipment," another treasury official said.
The country's imports grew by nearly 40 per cent during the first half of the current fiscal over that of the corresponding period of the last fiscal.
LCs against imports worth US$ 15.001 billion were settled during July-December period of fiscal 2010-11 compared to $10.717 billion in the corresponding period of fiscal 2009-10.
Pressure on foreign exchange reserve has increased gradually due mainly to higher import payments, the central bank officials said, adding that the country's foreign exchange reserve came down to US$10.381 billion Wednesday from $10.440 billion of the previous day.
"Some banks are making payment against their import bills using their customers' deposited US dollar," another treasury official said, adding there is no alternative way for the banks right now to settling such import obligations.
Most of the banks are facing deficiency in their net foreign exchange position indicating short supply of the greenback in the market, a senior official of the Bangladesh Bank (BB) said.
"We've asked eight commercial banks to maintain their net open position (NOP) limit of the foreign exchange properly for avoiding any risk," the BB official told the FE, adding the banks have already exceeded their NOP limit, fixed by the central bank earlier.
The central bank will take measures to discourage imports of less essential items aiming to minimise mismatch between demand and supply of the greenback in the market.
"We'll take effective measures in this connection in line with our new monetary policy," an executive director of the BB told the FE, adding that the central bank would give necessary instructions to the banks for implementation of the monetary policy.
On Sunday last, the central bank unveiled its half-yearly monetary policy that aimed at keeping inflation rate at around 7.0 per cent by the end of this fiscal through discouraging credit flow to unproductive sectors.
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