Forex floats on market in safe landing under surveillance

Country's forex market did not witness any unbecoming development on Thursday following the introduction of market-based Taka- Dollar exchange rate, as the regulator watched with adequate intervention bucks, officials and market players said.

It gives a sign of stability on the foreign-exchange market mainly because of higher supply but lower demand amid persisting economic sluggishness, according to analysts.

Amid tight vigilance by the central bank against unusual tantrums on part of any quarter, treasury heads of the country's commercial banks held a virtual meeting early Thursday where they discussed ways of keeping the rate in-between Tk 121 and Tk 122 per dollar.

Removing the last roadblock to IMF loan payout worth $1.3 billion through lifting the buying-selling spread in US dollar exchange with the taka, Bangladesh Bank (BB) Wednesday embraced the market-driven exchange rate within a hidden band after weeks of hard bargains with the multilateral lending agency.

According to the market players and central bank, majority of the commercial banks purchased dollars at rates ranging from Tk 121 to Tk 122 per American greenback while few others were maintaining exchange rate between Tk 122.10 and Tk 122.60 in buying the US currency.

A state-owned commercial bank was found quoting the greenback as high as Tk 123 per dollar, according to them.

But the forex deals on the interbank spot market shot up to a record US$21 million on the first day of the switch, which was $7.0-million higher from previous day's transacted deals on the spot market.

Although the shift in exchange rate cast little impact on banking channel, it impacted the kerb market where the rate rose to Tk 126 per US dollar from Tk 123 couple of days before.

Seeking anonymity, a BB official said the exchange rate remained stable even in the more flexible regime as they did not see any unusual rate fluctuation over the last two days.

The official said the supply of the foreign currencies continued rising while the demand was not so high while foreign currencies amounting to around $3.5 billion are expected to come from donor agencies like the IMF, the World Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank and Japan International Cooperation Agency.

"So, our projection is the exchange rate will remain stable in the coming days," says the central banker, adding that they, as part of their market vigilance, launched inspections in two private commercial banks.

With these two, the regulatory body has so far inspected a total of eleven banks having higher stock of forex to check whether the lenders try to distort the exchange rate using various tools.

Speaking on condition of anonymity, the treasury head of a private commercial bank said the marker kept behaving in a matured way because of lesser demand amid prevailing economic slowdown.

"If the demand goes up with resumption of full-fledged economic activities, the exchange rate may feel the pressure," he predicts.

The treasury head of another commercial bank, who also wants to remain anonymous, said treasury officials among themselves held a meeting on the day where they were instructed to keep the exchange rate bellow Tk 122.

"Is it a real picture of market-driven exchange rate?" The treasury official raised the question.

Irate over such "unprofessional" ways of controlling the rate, the senior banker said they decided on skipping dollar trade until it normalises.

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