In just one week, the taka’s value in relation to the US dollar has grown dramatically. Consequently, the market price of the dollar has decreased by 2 taka 90 paisa. The primary cause of this fall, according to economists and bankers, is the rise in export and remittance revenue and the decline in market demand for dollars.
For remittances, a number of institutions gave a maximum rate of up to 120 taka per dollar last Thursday, July 10. At the conclusion of the day, most banks refused to pay more than 120 taka, even if some people purchased it for 120 taka 60 paisa per dollar. But at the start of the week, the remittance dollar rate was 122 taka 80.
Bankers have reported a notable decline in the demand for dollars among banks. Many institutions are now opting to sell dollars rather than retain them. They attribute this shift to an increase in the dollar supply in the market, driven by a reduction in import letters of credit (LCs) and a rise in remittances and export earnings.
In the past, banks would eagerly purchase dollars from foreign exchange houses. However, the current scenario is quite the opposite. With the growing supply of dollars, many banks are becoming less inclined to buy at elevated prices. An official from a foreign exchange house indicated that if this trend persists, the dollar’s value may continue to decrease.
Last December, the dollar’s price soared to 128 taka within just two working days, causing market instability. Subsequently, the price fell slightly following intervention from the Bangladesh Bank. At that time, the governor remarked, ‘The hasty decisions made by certain banks have disrupted the dollar market.’ He also noted that some exchange houses were artificially inflating prices.
Analysts suggest that the increased dollar supply has positively influenced the market. Consequently, import costs are expected to decline, which will help mitigate inflation. Previously, banks faced challenges in opening LCs, but with the dollar supply now stabilizing, that pressure has eased. Furthermore, the gap between the dollar prices in the open market and banks has narrowed, contributing to market stability.
During the fiscal year 2024-25, expatriates sent a record $30.32 billion in remittances to the country. Since the current government assumed office, remittances have consistently exceeded $2 billion each month, with some months surpassing $3 billion. For the entire fiscal year 2023-24, remittances totaled $23.91 billion, averaging less than $2 billion per month during that period. In contrast, the remittance flow has seen a significant increase over the past year.
The demand for dollars was greater than the supply in prior years. The backlog of government import bills put pressure on state-owned banks to purchase currency.
“State-owned banks were directed to collect dollars from the market and pay import bills once the current governor assumed office,” stated Arif Hossain Khan, executive director and spokesperson for Bangladesh Bank. They have therefore settled nearly all of their debts. Currently, the supply of dollars is regular, and there is a substantial chance of a depreciation due to strong export profits and remittances.
