Forex traders mobilize to contain dollar instability

The umbrella organization of local concessionary banks has decided to tell its members to maintain a reference in the quotation of foreign currency exchange rates to foreign exchange houses engaged in money transfer.

According to sources, the move was aimed at curbing the current exchange rate volatility in the country’s money market.

The decision was taken at an emergency meeting of the executive committee of the Bangladesh Foreign Exchange Dealers’ Association (BAFEDA), which was held in Dhaka on Wednesday under the chairmanship of its chairman Ataur Rahman Prodhan.

Under the decision, the exchange rate of foreign exchange offices to be quoted by banks will be Tk 0.10 per US dollar lower than the interbank rate.

Prodhan, also managing director and chief executive of state-owned bank Sonali, said BAFEDA would send a letter with suggestions to its members and Bangladesh Bank as soon as possible.

BAFEDA has taken the latest step to ensure a healthy competitive atmosphere in the foreign exchange market by introducing a flat rate quotation system for foreign exchange houses.

Currently, some commercial banks are offering unusually high rates to foreign exchange offices to attract more outbound remittances and these rates are also responsible for market volatility, according to market insiders.

They also said that some banks offer higher rates ranging from Tk 91 to 94 for net remittances from foreign exchange houses bypassing the interbank rate or BC sell rates (bills collectible).

The US currency was quoted at Tk 87.50 each in the interbank market on Wednesday, unchanged from the previous level, while the sale rate of bills to be collected, generally known as BC, was at Tk 86.75.

Previously, the central bank had asked bankers to quote foreign currency exchange rates at foreign exchange offices after doing due diligence and reviewing the situation in the interbank foreign exchange market.

Sources, however, have indicated that BAFEDA will also instruct its members to avoid cashing in export proceeds from clients of other banks to avoid market misdirection.

On the other hand, the central bank provides foreign exchange liquidity support to banks continuously on a priority basis to settle their import payment obligations.

As part of the remedy, Bangladesh Bank on Wednesday sold $80 million directly to six banks slated to help settle import payments.

The central bank has so far sold $5.39 billion of reserves directly to commercial banks as liquidity support to settle their import payment obligations in the current fiscal year 2021-22.

The Bangladesh market has seen a volatile situation mainly due to higher outflows of foreign currency following a “strong growth” in import payments compared to inflows over the past few months.

Meanwhile, the exchange rate of the dollar in cash against the local currency in the open market, known as the curbside market, eased slightly, dropping below 100 Tk on Wednesday.

The US exchange rate fell to Tk 97 each on the day from Tk 102 the day before, traders said.

Sources, however, said demand for cash dollars eased slightly on Wednesday due to the higher price of the greenback in the curbside market.

The greenback rate could rise before the next Hajj if the decline in the supply of the US currency in the market continues, they predicted.

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