The Bangladesh Bank (BB) continued its intervention in the foreign exchange market on Sunday, purchasing $115 million from three commercial banks.
The transaction, conducted via auction at a rate of Tk122.30 per dollar, is part of a broader strategy to prevent the local currency from appreciating too rapidly amid a surplus of greenbacks.
Massive Dollar Influx in December The central bank has been aggressively mopping up excess liquidity to maintain market equilibrium. December Purchases: Total dollar buying for the month of December alone has reached $920 million.
Fiscal Year Total: Total purchases for the current fiscal year (starting July) now stand at $3.46 billion.
Factors Driving High Dollar Supply Bankers attribute the current market conditions to a combination of rising supply and cooling demand. Inward remittances have maintained a positive trend, boosting the availability of foreign currency. Large foreign payment pressures on the government have eased recently. Slower business activity has led to a drop in imports for capital machinery. This is further evidenced by private sector credit growth hitting a record low of 6.23% in October.
Strategic Market Intervention Since adopting a market-based exchange rate framework in July, the central bank has used auctions to "stabilize" the market. By buying dollars when supply is high and demand is weak, the BB prevents the dollar price from crashing, which helps protect the value of export earnings and remittance income for the nation.
