BB resumes dollar purchase after 1.5-month pause

After a hiatus of one and a half months, the Bangladesh Bank (BB) has resumed purchasing US dollars from the market, buying a total of US$120 million over Wednesday and Thursday.

Of this, $70 million was purchased on Wednesday from a single bank at Tk122.75 per dollar, while $50 million was bought on Thursday from four banks at the same rate.

The previous purchase was made on 2 March, when $25 million was bought at Tk122.30 per dollar. With the latest transactions, the central bank’s total dollar purchases in the current fiscal year have reached $5.61 billion. As a result, foreign exchange reserves, measured under the BPM6 methodology, have again exceeded $30.36 billion.

Before the fall of the Awami League government, the foreign exchange market experienced notable volatility. Stability returned after the interim government assumed office. However, following the formation of the BNP-led government and renewed tensions in the Middle East, the dollar rate saw slight fluctuations.

In early March, the dollar began to appreciate, rising from a stable range of Tk122.25-122.30 over the previous one and a half years to Tk122.75 by mid-March, prompting the central bank to halt purchases.

According to BB data, interbank transactions on Thursday ranged between Tk122.78 and Tk122.85 per dollar, compared with Tk122.91-122.95 on 12 April. Since the onset of the conflict, the dollar has edged up marginally.

Despite rising imports and declining exports, which widened the trade deficit to nearly $17 billion as of February, the foreign exchange market has remained relatively stable. Concerns had emerged that remittance inflows might weaken amid escalating tensions in the Middle East, particularly following reported attacks involving Israel and the United States on Iran. However, inflows have remained strong, while ongoing ceasefire discussions have helped ease market pressure.

Central Bank data show that expatriates sent around $1.61 billion through banking channels in the first 14 days of the current month, marking a 25% increase compared with the same period last year. So far in the current fiscal year, total remittance inflows stand at $27.82 billion, up 20.60% year-on-year. Remittances also grew by nearly 27% in the previous fiscal year.

Until 2021, the exchange rate remained stable at around Tk84 per dollar for an extended period. However, in the aftermath of the Covid-19 pandemic and the Russia-Ukraine war, the dollar rate surged beyond Tk122 before the fall of the Awami League government. During that period, foreign exchange reserves, which had once exceeded $48 billion, declined sharply.

At the time of the government’s fall, reserves stood at $20.48 billion under the IMF’s BPM6 methodology, while gross reserves were $25.92 billion.

As of 16 April, gross foreign exchange reserves have risen to $35.03 billion, while reserves under BPM6 have reached $30.36 billion. Last month, after settling around $1.37 billion in dues to the Asian Clearing Union (ACU) for January-February, reserves had fallen to $34.10 billion, with BPM6 reserves at $29.38 billion.