Dollar price cut by Tk0.50 after over a year of hikes

The buying and selling rates of the dollar were decreased by Tk0.50 after more than a year of hikes. 

The price for purchasing dollars for export proceeds and remittance fell to Tk110, down from Tk110.50. The price of selling dollars for import settlements was set at Tk110.50. It was Tk111 earlier.

The new prices will come into effect from today.

The decision was made at a meeting between the Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers Association (Bafeda).

ABB Chairman Selim RF Hussain confirmed the decision and told The Business Standard that as Bangladesh's foreign exchange was in a better position this year compared to the last, the price of dollar against taka was decreased.

According to the new rates, the banks will be able to pay a maximum rate of Tk112.75 for remittances with incentives from their own funds. Customers will get Tk115.5 with incentives announced by the government. However, banks will not be able to charge more than Tk110.50 for the sale of these dollars.

Earlier on 31 October, the ABB and the Bafeda increased the official buying and selling rates for remittance and export proceeds to Tk110.50 and Tk111, respectively. Previously, banks could buy a dollar at Tk110 and sell it at Tk110.50.

Sources present at Wednesday's meeting told TBS that at the beginning of the meeting, Bafeda Chairman Afzal Karim highlighted the current forex situation of Bangladesh. He said the country's current account deficit has improved compared to the previous fiscal year up to this point. At the same time, the trade balance deficit has significantly decreased during the same period of the previous year, he said, adding that foreign loans in the private sector have decreased by nearly $4 billion in the last 9 months.

"Furthermore, apart from 2-3 banks, others have an overbought position in Net Open Position, indicating an increased amount of dollars held by these banks. For many banks, the current overbought position in dollars is considered favourable compared to the past. Due to these reasons, adjustments have been made to lower the rate of the dollar," he said.

The managing director of a private bank said through yesterday's decision a signal has been given that the central bank will not increase the price of the dollar for now. 

However, the majority of banks are not strictly adhering to Bafeda's directive and they are currently purchasing dollars for remittances at a rate of Tk118-119 and selling them to importers at a higher rate, he said.

Ahsan H Mansur, former economist of the International Monetary Fund, thinks the decision will not be very effective for the market. "The reduction in the rate of the dollar is not very significant. Nevertheless, the market does provide different signals regarding the dollar rate. No bank is conducting dollar transactions at the Bafeda-set rate. No importer can buy dollars at the Bafeda-prescribed rate, and banks cannot sell at that rate either," he said. 

"Currently, there are two rates for the dollar in remittances, export proceeds, and import settlements. One rate is the one announced by Bafeda, and the other is the rate at which transactions occur in the market. At this point, Bafeda is becoming an ineffective institution," commented the economist, while talking to TBS.

On 11 September 2022, during a meeting, the ABB and the Bafeda capped the rates of the dollar at Tk108 for remittance inflows and Tk99 for export proceeds. The latest adjustment occurred on 23 October 2022, when the dollar rate for remittances was reduced by Tk0.50. 

Since then, remittances, export proceeds and import settlements have not been reduced. Rather the dollar rates were often raised at the monthly ABB and Bafeda meetings.