TDS Desk:

The price of the US dollar has been steadily climbing since Monday following Bangladesh Bank’s purchase of greenbacks through an auction from commercial banks.

Data from Bangladesh Bank on Tuesday morning showed the average dollar rate on Monday stood at Tk 121.11, while the highest selling rate reached Tk 121.50.

On Jul 14, the average exchange rate was Tk 119.72, with a high of Tk 120.10. On Jul 13, the highest rate was Tk 121.20, and on Jul 10, it reached Tk 121.85.

Discussions with treasury officials from the central bank and commercial lenders revealed that on Monday, banks purchased remittance dollars from foreign exchange houses at rates ranging between Tk 120.50-120.80.

The remittance rate dropped to Tk 119 on Sunday.

In an effort to stabilise the dollar’s value amid the decline, Bangladesh Bank purchased $171 million from 18 commercial banks at Tk 121.50 on Sunday.

Although many banks quoted rates above Tk 120 during the auction, the central bank accepted the highest rate.

This marked the first time Bangladesh Bank conducted such a dollar purchase through an auction. The move was aimed at lifting the dollar rate after recent declines.

Arief Hossain Khan, executive director and spokesperson of Bangladesh Bank, confirmed the auction purchase and said it led to Monday’s price increase.

“A decrease in the dollar rate is not good for the economy. A significant increase is also not good,” he said.

“Therefore, if the rate decreases or increases, Bangladesh Bank will stabilise it through necessary measures.”

He added that the price drop was driven by high supply.

“Everything in the economy depends on supply and demand. The dollar price has fallen due to high supply. So the central bank has bought dollars from the market. So the price has increased a little more than before.”

Previously, the central bank bought dollars at fixed rates. Sunday’s auction was the first of its kind.

“The main purpose of Bangladesh Bank in buying dollars from commercial banks is to increase its price,” Arief said.

A senior Bangladesh Bank official clarified that auctions would not be a regular occurrence.

“We will buy dollars through auctions when it is deemed necessary according to the market situation.”

On May 14, the central bank announced it would allow the exchange rate to be market-based, a condition tied to its agreement with the International Monetary Fund. However, the dollar price remained largely unchanged in the weeks that followed.

While the rate stayed flat initially, it had been showing a slight downward trend for the past one and a half weeks. Bankers attributed this to a steady supply of dollars, supported by higher export earnings and increased remittances. Imports of capital machinery and equipment have slowed, reducing dollar outflows.

Explaining why the central bank offered higher rates than those expected by commercial banks, a deputy managing director of a private bank said the market had panicked over falling prices.

“If the dollar price fell, importers would benefit, but exporters and expatriates who sent remittances would be harmed,” he said.

“In that case, there would also be a threat of them going to Hundis.”

Officials from the central bank said that apart from occasional spikes in remittances, the market has remained stable due to consistent export income.

Dollar inflows also increased following fund releases from the IMF, Asian Development Bank, Japan International Cooperation Agency, and the Asian Infrastructure Investment Bank in June.

A treasury head at a private bank noted that demand for dollars had not picked up significantly as there were fewer import letters of credit being opened.

“Currently, investment is very low, and if it decreases, the import of capital equipment and other goods will decrease,” he said.

He added that most imports now are daily necessities such as fuel and food for the government.

“Moreover, there were import arrears earlier, but now there are none. That is not going to increase the demand for dollars very quickly.”

A senior official at the central bank said the institution is looking to keep the dollar rate between Tk 122.50 and Tk 123.

If the rate rises or falls beyond this range, the central bank will intervene as needed.