Pressure mounts on foreign exchange market as US dollar demand surges

The country’s foreign exchange market is facing renewed pressure due to a sudden rise in the demand for US dollars to settle import payments, affecting interbank rates, commercial banks, and the kerb (open) market.

As a result, the exchange rate of the US dollar has been steadily climbing over the past few weeks.

According to the latest data from Bangladesh Bank, the interbank exchange rate stood at Tk 123.82 per dollar on July 30. On the same day, the spot market rate traded at Tk 123.88, compared to Tk 122.85 just a month prior. However, to clear letters of credit (LCs) for international trade, several commercial banks are spending up to Tk 123.95 per dollar.

Industry insiders attribute the ongoing pressure to a combination of domestic and global factors. Such as-
Rising Global Fuel and Commodity Prices: Escalating geopolitical tensions and fresh conflict in the Middle East have driven up global fuel oil prices, significantly inflating import bills for essential goods, including fuel and fertilizer.

Widening Trade Deficit: While import costs continue to rise, export earnings have failed to keep pace. Central bank data shows that during the first 11 months (July�"May) of FY2025�"26, imports rose 6.26 percent year-on-year to nearly $64 billion. Conversely, export earnings fell by nearly 2 percent to roughly $40 billion, intensifying pressure on foreign reserves.

Slowing Remittance Inflows: Remittance flow�"a vital source of foreign currency�"has moderated in recent months. Although expatriates sent a record $35.59 billion home in FY2025�"26, inflows slowed following Eid-ul-Fitr and Eid-ul-Adha. After maintaining over $3 billion monthly for six consecutive months, remittance receipts dropped to $2.82 billion in June and $2.86 billion in July, contracting dollar supply in the market.

To curb aggressive bidding and control price escalation, Bangladesh Bank recently issued verbal instructions to commercial banks, capping dollar acquisition rates at Tk 123.82 across all channels including interbank transactions and remittance procurement.

Despite regulatory interventions, the kerb market has felt the impact. A visit to money exchange houses in Motijheel on Sunday revealed that money changers were buying dollars from customers at Tk 126.00 to Tk 126.40 and selling at Tk 126.70 to Tk 126.80. A month ago, open market rates ranged between Tk 125.00 and Tk 125.20.

Market experts noted that while high import bills, sluggish exports, and reduced remittance inflows have created short-term strain, strict monitoring by the central bank and consistent foreign currency supply could stabilize the market within the coming weeks.�"UNB