Dollar Climbs Against Taka as BB Intervention Fails to Ease Market Pressure 

The US dollar has continued to gain against the taka despite repeated interventions by Bangladesh Bank (BB), rising to Tk124.42 in the banking market on November 4 from Tk123.69 on October 22.

The 15-day increase of Tk0.73 represents a 0.59 per cent depreciation of the taka. The dollar peaked at Tk124.51 on November 3 before easing slightly.

The pressure is more pronounced in the cash market, where the reported selling rate has reached Tk129, Tk4.58 above the November 4 banking rate. However, the actual kerb-market rate could not be independently confirmed.

Bangladesh Bank sold $120 million to commercial banks on November 4 through an auction, following a $122 million sale on October 28. But the interventions have failed to ease the pressure as banks continue to face strong demand for dollars, particularly to settle import payments.

On October 28, banks sought $800 million from the central bank, which supplied only $122 million, meeting 15.25 per cent of demand. On November 3, BB offered another $100 million but reportedly made no sale as banks sought rates above its acceptable level.

The dollar shortage is increasing costs for importers, raising the taka value of payments for fuel, energy, industrial raw materials and machinery. This could push up production costs and consumer prices.

The interbank rate stood at around Tk124.34 on November 5, while some banks quoted cash-dollar selling rates as high as Tk125.75. The latest publicly reported informal-market benchmark was Tk126.50.

Import payments are adding to the pressure. Bangladesh Bank data show that import payments rose 12 per cent year-on-year to $12.20 billion in July and August of the current fiscal year. Petroleum product payments nearly doubled to $2.49 billion from $1.25 billion a year earlier.

Banks opened letters of credit worth more than $8 billion in September, while settlements exceeded $6.5 billion, adding to demand for foreign currency.

Remittances, meanwhile, rose to $2.87 billion in October from $2.56 billion a year earlier, but monthly inflows have remained below $3 billion for five consecutive months.

A senior private banker said weaker-than-expected export earnings, lower remittance inflows and additional government LC payments had contributed to the pressure.

A senior Bangladesh Bank official said the central bank was intervening to prevent the dollar from crossing Tk125.

The central bank now faces a difficult balancing act between meeting banks' payment requirements and protecting foreign exchange reserves. Unless dollar inflows improve, further interventions may provide only temporary relief.