Taka depreciates by a big margin

FE Report (March 21, 2011)

Bangladesh Taka (BDT) depreciated by 0.58 per cent against the US dollar in a single day on Sunday following increased demand for the greenback to settle import payments by the commercial banks.

The rate of US dollar in the inter-bank foreign exchange market jumped to a maximum of Tk 72.40 Sunday on heavy buying pressure from the commercial banks, treasury officials said.

"The market forces have pushed up the inter-bank US$/BDT rates," a senior official of the Bangladesh Bank (BB) told the FE, adding that the central bank is monitoring the overall foreign exchange market closely.

The US dollar was quoted at Tk 71.99 -Tk 72.40 in the inter-bank foreign exchange market on the day against Tk 71.94- Tk 71.98 of the previous working day, according to the central bank statistics.

"We'll intervene in the market if it behaves irrationally," the BB official said, adding that such inter-bank rate of the greenback will discourage third currency, popularly known as cross currencies.

Besides, the hike in inter-bank rate of US dollar will help bring an equilibrium between the bills for collection (BC) and the inter-bank rates, he added.

The US dollar was quoted at maximum Tk 73.50 for BC sold Sunday. The rate remained unchanged from the previous level, according to the Bangladesh Foreign Exchange Dealers Association (BAFEDA) statistics.

The BDT was depreciated in the first working day of this week mainly due to increasing demand for greenback in the inter-bank market for settlement of import payments, treasury officials said.

"It's a massive depreciation of the BDT against the greenback in a single day after introducing floating exchange rate (FER) in 2003," a senior treasury official of a leading private commercial bank told the FE.

He also said such depreciation of the BDT will facilitate the country's export businesses as well as encourage Bangladeshi nationals working abroad for remitting their hard earnings.

"The BDT is still stronger than Pakistani and Sri Lankan Rupees," the treasury official said without elaborating.

The country's growing export earnings will be helped by this depreciation when the interest rates are expected to increase further in the coming days, another treasury official of a commercial bank said.

"Though the cost of doing business would go up, the export sectors will be happy," he said, adding that the non-resident Bangladeshis, facing challenges in the Middle East countries, would be encouraged to remit their earnings using banking channel.