The exchange rate of Bangladesh taka (BDT) again dropped against the US dollar (US$)- mainly due to higher demand for the greenback for settling import-payment obligations.
The local currency lost its value by 25 paisa in the inter-bank foreign exchange (forex) market on Monday in such a fall after nearly two weeks, market operators say.
The US currency was quoted at Tk 86.70 each on the day against Tk 86.45 on the previous working day. It was Tk 86.20 on April 26.
The BDT lost its value by 1.05 per cent or Tk 0.90 since January 2022 on the same ground, they add.
The exchange rate of local currency also depreciated similarly against the greenback at customers' level for settling import payments.
The US dollar was quoted at maximum of Tk 86.75 each for the sale of bills for collection, generally known as BC, on the day against Tk 86.50 of the previous level.
Some banks, however, traded the US currency at more than Tk 93 in the name of 'corporate deal' to settle import-payment obligations of their customers, according to the operators.
On the other hand, the banks quoted dollar at Tk 85.75 on the day against Tk 85.50 on the previous working day to remitters for telegraphic transfer (TT) of their funds.
"The local currency depreciated further against the US dollar in line with the market requirement," a senior official of the Bangladesh Bank (BB) tells the FE.
The demand for the US currency increased recently mainly due to higher prices of essential items, including fuel-oils, in the global market - following the ongoing Russia-Ukraine war, the central banker explains.
He also says the central bank is providing the foreign-currency liquidity support to the banks continuously on a priority basis to settle their import-payment obligations.
As part of the move, the BB sold $20 million directly to a state-owned commercial bank (SoCB) on Monday to meet the growing demand for the greenback in the market.
The central bank has so far sold nearly $5.0 billion from the reserve directly to the commercial banks as liquidity support for settling their import-payment obligations in the current fiscal year (FY), 2021-22.
Bangladesh's foreign currency reserve came down to nearly $44 billion on Monday from $44.07 billion of the previous working day, according to official figures.
The forex reserve is likely to fall below $42 billion today (Tuesday) after making a routine payment worth $2.24 billion to the Asian Clearing Union (ACU) against the imports of the March-April of 2022.
Bangladesh's foreign exchange reserve has been maintaining a falling trend in recent months following higher import payment obligations along with lower flow of inward remittances.
"We may continue providing such foreign-currency support to the banks in line with the market requirement," another central banker says while replying to a query.
The BDT's latest depreciation came against the backdrop of higher outflow of foreign exchange following higher import-payment obligations than that of the inflow in the last few months, the operators add.
Meanwhile, the settlement of letters of credit (LCs), generally known as actual import, in terms of value, rose by nearly 50 per cent to $60.57 billion during the July-March period of FY 22, from $40.48 billion in the same period of the previous fiscal, the BB data showed.
On the other hand, the opening of LCs, generally known as import orders, grew by more than 46 per cent to $68.36 billion during the period from $46.81 billion in the same period of FY 21.
Bangladesh's overall imports have increased significantly in recent months, following gradual reopening of economic activities - both at domestic and global levels - after more than one year of the Covid-19 pandemic shock.
The operators, however, say lower remittance inflow also pushed up pressure on the country's foreign-exchange market recently.
The flow of inward remittances dropped by more than 16 per cent to $17.31 billion during the July-April period of the FY 22 from $20.66 billion in the same period of the previous fiscal.
Talking to the FE, Professor Shah Md. Ahsan Habib of the Bangladesh Institute of Bank Management (BIBM), says gradual depreciation of the local currency against the US dollar is a right strategy.
"But imports will be costlier in the near future following such depreciation of the BDT against the greenback."
He also says such depreciation of the local currency will help boost export earnings as well as flow of inward remittance.
"But it may fuel inflationary pressure further on the economy," he notes.