Business

Forex market volatile again on Ramadan import rush, overdue LCs

BB seeks explanation from MDs of 13 banks
US dollars/Pixabay

After a five-month pause, dollar rates have started to rise, prompting the central bank to question the managing directors of 13 banks about the fresh volatility of the greenback.

In their response to the Bangladesh Bank (BB) yesterday, several bankers said the foreign exchange market is currently under pressure due to the opening of letters of credit (LC) for essential Ramadan commodities and the settlement of overdue LCs.

They further cited the central bank's dollar purchasing spree to safeguard dwindling forex reserves and market manipulation by certain exchange houses as contributing factors to the recent dollar hikes.

The BB accused the 13 banks of quoting unusually high rates for collecting remittances from foreign exchange houses compared to the official rate, according to Bangladesh Bank Executive Director and Spokesperson Husne Ara Shikha.

The 13 banks are: BRAC Bank, Islami Bank Bangladesh, Shahjalal Islami Bank, Jamuna Bank, Trust Bank, Rupali Bank, Eastern Bank, Janata Bank, United Commercial Bank, NCC Bank, Mercantile Bank, City Bank and Al Arafah Islami Bank.

A senior central bank official said the foreign exchange market has become unstable this month due to some banks offering dollar rates higher than the official rate.

Currently, a crawling peg exchange rate system is in place, allowing banks to buy and sell US dollars freely within a mid-range of Tk 117.

While banks are permitted to quote a maximum of Tk 120 per dollar for remittance collection, some banks are reportedly quoting as high as Tk 128 per dollar.

Central bank officials have warned that banks may face consequences if their explanations are deemed unsatisfactory.

"We submitted our explanation to the central bank on Sunday and will follow the BB instructions regarding US dollar purchases from foreign exchange houses," said Mirza Elias Uddin Ahmed, managing director and CEO of Jamuna Bank.

He said there is pressure on the foreign exchange market as letter of credit (LC) openings for commodities have increased ahead of Ramadan.

"We are unable to collect enough foreign exchange at the current official rate," he said, adding that in some cases, foreign exchange houses are responsible for the high US dollar rate.

Ahmed, however, was optimistic that the forex market to stabilise soon.

A senior official of BRAC Bank told The Daily Star that their bank sent the explanation to the central bank yesterday.

He attributed the forex market's instability to a lack of communication and coordination.

He pointed out that the central bank's recent instruction to banks to clear overdue LC payments had prompted some banks to aggressively offer high rates to collect foreign currencies.

Officials of the treasury department of City Bank confirmed that they had sent their explanation to the central bank.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said the central bank's recent directive to banks to clear overdue LC payments by the end of December had driven banks to intensify their efforts to collect foreign currencies this month.

Rahman also said that several major LCs had opened this month.

Requesting not to be named, a senior official of Mercantile Bank told The Daily Star that three major factors were contributing to the volatility in the foreign exchange market.

Those are: the central bank's lifting of restrictions on LC openings for crisis-hit banks, suspension of US dollar selling by the BB to banks from the reserve and the seasonal pressure on the foreign exchange market during October to December period.

According to the BB, the exchange rate of the taka and the US dollar is set to become more flexible in line with the recommendations by the International Monetary Fund (IMF).

A BB official said the banking regulator plans to publish a reference rate for foreign currencies based on daily bidding rates provided by banks.

The banking regulator aims to align the reference rate with the rates at which banks buy and sell US dollars, the official added.

 

Comments

Forex market volatile again on Ramadan import rush, overdue LCs

BB seeks explanation from MDs of 13 banks
US dollars/Pixabay

After a five-month pause, dollar rates have started to rise, prompting the central bank to question the managing directors of 13 banks about the fresh volatility of the greenback.

In their response to the Bangladesh Bank (BB) yesterday, several bankers said the foreign exchange market is currently under pressure due to the opening of letters of credit (LC) for essential Ramadan commodities and the settlement of overdue LCs.

They further cited the central bank's dollar purchasing spree to safeguard dwindling forex reserves and market manipulation by certain exchange houses as contributing factors to the recent dollar hikes.

The BB accused the 13 banks of quoting unusually high rates for collecting remittances from foreign exchange houses compared to the official rate, according to Bangladesh Bank Executive Director and Spokesperson Husne Ara Shikha.

The 13 banks are: BRAC Bank, Islami Bank Bangladesh, Shahjalal Islami Bank, Jamuna Bank, Trust Bank, Rupali Bank, Eastern Bank, Janata Bank, United Commercial Bank, NCC Bank, Mercantile Bank, City Bank and Al Arafah Islami Bank.

A senior central bank official said the foreign exchange market has become unstable this month due to some banks offering dollar rates higher than the official rate.

Currently, a crawling peg exchange rate system is in place, allowing banks to buy and sell US dollars freely within a mid-range of Tk 117.

While banks are permitted to quote a maximum of Tk 120 per dollar for remittance collection, some banks are reportedly quoting as high as Tk 128 per dollar.

Central bank officials have warned that banks may face consequences if their explanations are deemed unsatisfactory.

"We submitted our explanation to the central bank on Sunday and will follow the BB instructions regarding US dollar purchases from foreign exchange houses," said Mirza Elias Uddin Ahmed, managing director and CEO of Jamuna Bank.

He said there is pressure on the foreign exchange market as letter of credit (LC) openings for commodities have increased ahead of Ramadan.

"We are unable to collect enough foreign exchange at the current official rate," he said, adding that in some cases, foreign exchange houses are responsible for the high US dollar rate.

Ahmed, however, was optimistic that the forex market to stabilise soon.

A senior official of BRAC Bank told The Daily Star that their bank sent the explanation to the central bank yesterday.

He attributed the forex market's instability to a lack of communication and coordination.

He pointed out that the central bank's recent instruction to banks to clear overdue LC payments had prompted some banks to aggressively offer high rates to collect foreign currencies.

Officials of the treasury department of City Bank confirmed that they had sent their explanation to the central bank.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said the central bank's recent directive to banks to clear overdue LC payments by the end of December had driven banks to intensify their efforts to collect foreign currencies this month.

Rahman also said that several major LCs had opened this month.

Requesting not to be named, a senior official of Mercantile Bank told The Daily Star that three major factors were contributing to the volatility in the foreign exchange market.

Those are: the central bank's lifting of restrictions on LC openings for crisis-hit banks, suspension of US dollar selling by the BB to banks from the reserve and the seasonal pressure on the foreign exchange market during October to December period.

According to the BB, the exchange rate of the taka and the US dollar is set to become more flexible in line with the recommendations by the International Monetary Fund (IMF).

A BB official said the banking regulator plans to publish a reference rate for foreign currencies based on daily bidding rates provided by banks.

The banking regulator aims to align the reference rate with the rates at which banks buy and sell US dollars, the official added.

 

Comments

বছরখানেক সময় পেলে সংস্কার কাজগুলো করে যাব: আইন উপদেষ্টা

আইন উপদেষ্টা বলেন, দেশে যদি প্রতি পাঁচ বছর পর পর সুষ্ঠু নির্বাচন হতো এবং নির্বাচিত দল সরকার গঠন করত, তাহলে ক্ষমতাসীন দল বিচার বিভাগকে ব্যবহার করে এতটা স্বৈরাচারী আচরণ করতে পারত না।

২২ মিনিট আগে