Bangladesh Bank sold $11.5 million from its foreign exchange reserves to six commercial banks through an open auction on Tuesday, marking the central bank’s first such sale aimed at containing the rise in the US dollar exchange rate.
The central bank had targeted selling $20 million, but the auction resulted in sales of 58% of the targeted amount. The dollars were sold at rates ranging from Tk122.80 to Tk123.35 per dollar.
A senior Bangladesh Bank official said the intervention was aimed at preventing further increases in the exchange rate and sending a signal to the market that the central bank would supply dollars when demand pressures push up prices. The central bank may also purchase dollars from the market if foreign currency inflows increase, the official said.
Bangladesh Bank had previously sold dollars from its reserves after the foreign exchange crisis began in mid-2022. However, those sales were made directly to selected banks to meet specific customer requirements rather than through open auctions. Tuesday’s auction was open to all commercial banks, with dollars sold to banks offering the highest bids.
The auction came as the dollar rate for settling letters of credit (LCs) rose to Tk123.45, compared with Tk123.10 last Thursday and below Tk123 in the previous week.
Earlier this month, Bangladesh Bank purchased $50 million from four banks at Tk122.75 per dollar as part of its efforts to build foreign exchange reserves.
Meanwhile, several remittance houses offered to sell dollars to commercial banks at Tk123.40 on Tuesday morning and later sought to raise the rate to Tk123.60. Some banks, however, were unwilling to buy at the higher rate.
Bankers said the higher rates sought by remittance houses had created upward pressure on the exchange rate. They expect the central bank’s dollar supply through the auction to ease rates in both the LC settlement and remittance markets.
According to bankers, the central bank’s intervention could make it difficult for remittance houses to maintain the Tk123.60 rate, potentially putting downward pressure on the overall dollar market.
