Demand for the greenback grows with rising imports

The central bank has resumed after one month the sales of US dollar to the commercial banks to provide them with foreign exchange support and stabilise the market, officials said.

As part of the move, Bangladesh Bank (BB) sold US$ 20 million at market rate to two commercial banks directly on Thursday to meet the growing demand for the greenback in the exchange market.

"We've sold the US dollar to facilitate the banks for making payments against import bills of petroleum products," a senior official at the BB told the FE.

He said the central bank might continue supporting the banks with the foreign currency subject to market requirement.

"We've provided such foreign currency support to the banks only for settling import payment obligations against food grains and fuel oils," he explained.

Earlier on July 25, the BB sold same amount of the US currency to a leading state-owned commercial bank for making payment of their food grains import bills.

In May last, it sold $21 million to the banks, according to the BB statistics.

The BB's latest move came against the backdrop of depreciation of the Bangladesh Taka (BDT) against the US dollar in both the inter-bank foreign exchange market and customers' end in the recent days.

The US dollar was quoted at Tk 80.65-Tk 80.66 in the inter-bank foreign exchange market on the day against Tk 80.64  on July 26, according to the market operators.

On the other hand, the exchange rate of the greenback for BC (bills for collection) selling rose to Tk 81.7338 Sunday from Tk 81.7326 of the previous working day.

It was Tk 81.7062 on July 26, according to the statistics of the Bangladesh Foreign Exchange Dealers Association (BAFEDA).

The country's foreign exchange reserve stood at $32. 84 billion Sunday, despite selling of $40 million to the commercial banks for settling import bills in the last week, according to another BB official.

"We expect that the inflow of foreign exchange may increase in the month following the upward trend of the inward remittance ahead of the Eid-ul-Azha," he said.

Bangladesh received $1.02 billion in remittances between July 1 and July 28 from expatriate Bangladeshi nationals who are working abroad.  It may cross $1.10 billion by the end of July.

"But the flow of inward remittance may rise in the month of August ahead of the Eid," the BB official said.

Meanwhile, some banks are now holding sufficient amount of the greenback as the central bank raised substantially the net open position (NOP) limit of the banks last year, according to market insiders.

They said the banks are now following a 'go-slow' strategy for selling the greenback to the other banks.

"The banks believe that the exchange rate of BDT against the US dollar will depreciate further in the near future for making import bills of different commodities, particularly food grains," a senior treasury official of a leading private commercial bank explained.

He said the import of food grains might increase substantially in the coming months to meet the growing demand for the essential commodities in the domestic market.    

The NOPs of all the 56 scheduled banks have been increased by more than 45 per cent to US$ 2.19 billion from previous $1.51 billion.

It was determined on the basis of 20 per cent of the total regulatory capital of the banks as on March 31, 2016, according to the BB officials.