Interbank exchange rate market gets active after months

After a consensus on uniform exchange rates, the interbank market, which remained inoperative for several months, became active on Tuesday.

One US dollar was traded at Tk 106 in the interbank market, according to data released on the Bangladesh Bank website. Till Monday, the interbank exchange rate was the price at which the central bank sold dollars to the commercial banks.

Bangladesh’s interbank foreign exchange market did not work for the past four months due to a lack of sellers as all banks were in need of greenbacks to meet their burgeoning import payments.

At one point in time in May, the BB intervened and fixed the exchange rates – for interbank, import payments and remittances – but that did not work also. Then the BB backtracked and handed over the issue to the markets in early June, yet, the volatility in the exchange rate market did not ease.

Finally, on August 11, the Association of Bankers Bangladesh and foreign exchange dealers came to an agreement on uniform exchange rates that should be followed by all banks to avoid distortion and volatility.

Accordingly, banks have been allowed to quote a maximum Tk 108 for buying a dollar from overseas exchange houses and Tk 99 for procuring export proceeds. On the other hand, the exchange rate for import bills (BC sale) has been set at Tk 104.50 per dollar.

Bangladesh’s exports rose over 34 percent to $52 billion in fiscal 2021-22. But imports soared higher than exports. Also, inward remittances, the second biggest source of Bangladesh’s foreign currency, are on a declining trend. As a result, the country’s foreign exchange reserves declined to below $37 billion for the first time in over two years.