Banks appreciate taka further against US dollar

Bankers decided to cut purchase and selling rates of the US dollars by more Tk 0.25 per dollar from next week to signal to the market that the USD rate would not always rise against the taka.

Officially, banks will buy each dollar at Tk 109.75 from remitters and exporters and sell each at Tk 110.25 to importers from December 3, as per the latest decision of The Bangladesh Foreign Exchange Dealers' Association (Bafeda) and the Association of Bankers, Bangladesh (ABB).

The interbank exchange rate will be Tk 110.25 per dollar.

The additional 2.5 percent incentive from banks' own funds and the government announced 2.5 percent incentives on remittance earnings will remain unchanged.

The Bafeda and ABB took the decision at a meeting on Tuesday night.

Some exporters are delaying the realisation of export proceeds while some local syndicates are holding on to cash dollars because they think that the USD rate will increase in the upcoming days. That is why bankers decided to cut the USD rate against the local currency, industry insiders said.

Selim RF Hussain, chairman of ABB, told The Daily Star that they had taken the decision to give the message to the market that the USD rate would not always rise against local currency.

He said they will trade at the new rates starting next week.

In a recent meeting, Bangladesh Bank (BB) governor Abdur Rouf Talukder told bank executives that export realisation had dropped in recent months.

During July to September of this fiscal year, Bangladesh received $10 billion in exports proceeds, down from $13 billion in the same period of the last fiscal year, as per the central bank's provisional data.

In October, the BB had directed banks to realise the previous exports proceeds within 31 October.

Bafeda and ABB began to appreciate the taka against the US dollar last week. They first appreciated the taka by Tk 0.50 against the US dollar, deciding to buy the greenback at Tk 110 from exporters and remitters and sell at Tk 110.5 each.

However, these rates exist only on paper. In reality, banks are trading foreign currency at a higher rate.

Mustafa K Mujeri, a former chief economist of the central bank, told The Daily Star that this rate is not effective in the market.

As per the economist, no transactions in the market are done the rate determined by Bafeda-ABB.

The central bank bought $70 million on Monday and Tuesday from Islami Bank. As per central bank officials, it wants to deliver the message to the market that the banking sector is holding on to excess dollars through that purchase.

Bangladesh Bank spokesperson and executive director Md Mezbaul Haque recently told journalists that only 21 banks had a shortage of dollars while the rest had an excess.