Dollar price surged to as much as Tk 127 in the kerb market today as the demand far outpaced its supply in the money exchange houses,  insiders said.

The rate of the US dollar was around Tk 122 in the informal market until the first half of November 8 but it shot up in the second half of the day suddenly, said a money changer seeking to remain unnamed.

"It happened not only in case of US dollar. The exchange rate of other currencies also rose by Tk 4-5 overnight."

The kerb market, a main source of cash dollar and other major currencies, registered a jump in the exchange rate a day after media reported that some banks were offering as much as Tk 124 for a greenback to encourage remitters to use formal channels instead of informal money transfer systems like "hundi".

Following the reports, the Bangladesh Foreign Exchange Dealers' Association and the Association of Bankers' Bangladesh on November 8 asked banks not to pay over Tk 115 for every dollar at the time of collecting foreign currencies from the remitters.

A top official of a private bank said there might be a correlation to that but various factors such as a demand spike for payments for smuggling or illegal money transfer abroad might also fuelled exchange rates in the kerb market.

"The dollar market has heated up. There is acute shortage of dollar," said another money changer in Dhaka.

He said the cost of each greenback was below Tk 120 early this month and it crossed Tk 120 on last Sunday.

A top official of an international courier company seeking anonymity said he had to pay his foreign trade partners through hundi as options like letters of credit or telegraphic transfer shrunk because of the prolonged US dollar crisis.

The International Air Express Association of Bangladesh (IAEAB), the trade body of global express courier companies, has set the US dollar rate at Tk 110.5 for November 8 and onwards, he said.

"But through hundi we have been paying at Tk 124 a dollar for the last one week, which rose to Tk 127 a dollar today (Thursday)," he added.

The official also said the stockpiling of US dollar by banks and big companies has caused the rate of the American greenback to go so high.

The development takes place the time when Bangladesh's foreign exchange market becomes volatile in the face of shortage of the dollars as its requirement for external payment overshoots the overall inflow from remittances and exports.

In the July-October period of this year, Bangladesh's export growth decelerated to 3.5 percent when inflow of remittance, another major source of foreign currency, declined by 4.3 percent year-on-year, official data showed.

The country, which recorded over $48 billion in foreign currency reserves on August 24 in 2021, saw it losing $28 billion since then.

The foreign exchange reserve as per the balance of payment manual of the International Monetary Fund was $20.7 billion on November 8, according to the Bangladesh Bank (BB) data.

Taka lost nearly 30 percent in value to the greenback over the last two years, showed BB data.