BB intervenes in Forex market, buys $50m from banks

Collected Photo

Bangladesh Bank purchased 50 million US dollars from commercial banks through an auction on Tuesday (September 1) following an increase in dollar supply and falling market prices.

This marks the central bank’s first dollar purchase from commercial banks in nearly three and a half months.

The central bank bought the greenbacks from four banks at a rate of Tk 122.75 per dollar on Tuesday. Bangladesh Bank last bought dollars from commercial banks on May 20.

Central bank officials stated that dollar rates in the market were relatively low on Tuesday morning. Banks bought dollars from remittance houses at Tk 122.30 to Tk 122.40. Meanwhile, import liabilities or letters of credit (LCs) were settled between Tk 122.50 and Tk 122.60.

However, the market reacted after Bangladesh Bank announced its decision at noon to buy dollars at Tk 122.75. By afternoon, several banks began buying remittance dollars and settling LCs at the same rate.

A senior commercial bank official noted that the purchase sent a clear signal to the market that the central bank will not allow dollar rates to fall below Tk 122.75.

Bankers said commercial banks currently hold adequate dollar liquidity. Pressure to settle import liabilities have also dropped slightly. Weak private sector credit growth has further reduced demand for foreign currency. Consequently, higher supply relative to demand pushed dollar rates downward.

Dollar rates rose up to Tk 123.65 late last week, after dropping to Tk 122 two weeks ago. The currency has experienced noticeable fluctuations over recent weeks.

Bankers expect dollar demand to rise next month as Bangladesh Petroleum Corporation (BPC) faces scheduled payment obligations.

Bangladesh Bank informed commercial banks of the purchase decision around 1:00 PM on Tuesday. The central bank usually notifies banks in the morning. As a result, commercial banks settled LCs for various businesses at lower rates earlier in the day.