Friday, 1 July, 2022

Dollar price rises further

Taka has weakened further against the US dollar as Bangladesh Bank (BB) has devalued the local currency to Tk 91.95 against each dollar amid the falling supply of the greenback due to surging imports and rising inflation.

The latest appreciation of dollar is Tk 2.05 higher than Sunday's rate of Tk 89.90. The inter-bank dollar rate was Tk 91.50 on Thursday.

“Dollar rate has been hiked considering the market situation. There is a little impact on inflation as the rate is already adjusted at import level transactions,” Md Habibur Rahman, chief economist of Bangladesh Bank, told the Daily Sun on Monday.

Monday’s devaluation was the ninth depreciation of the current year.

BB sold 130 million dollars to the banks at a price of Tk 89.90 per unit on Sunday. The central bank released another 5 million dollars from reserve to meet the urgent demand at rate of Tk 91.50 on weekend.

The BB has resorted to frequent depreciation of Bangladesh currency to stabilize the restive foreign exchange trade.

Besides, the inflation rate, a major indicator of the economy, jumped to 6.29 percent, the highest in 18 months in April due to high commodity prices in the international market. The actual inflation is over 10 percent, according to a quarter of economists

Regarding the central bank’s move, economist Dr Zaid Bakht said the appreciation of dollar will increase the cost of imports which may create an inflationary impact temporality.       “There is no alternative to the devaluation of local currency as there is a huge gap between exports and imports. So, the appreciation of dollar will bring a sustainable situation,” Dr Zaid, chairman of Agrani Bank, told the Daily Sun.

BB lifted the dollar price limit last Thursday to encourage more inward remittance. The central bank gave flexibility to the bank to set dollar prices in line with the market. Dollar price has increased twice since then.

Another appreciation of the US dollar will further increase the cost of imports and exporters will benefit. The appreciation will benefit the exporters who have been making this demand for a long time.

Policy Research Institute (PRI) Executive Director Dr Ahsan H Mansur is surprised by the gradual appreciation of dollar against the local currency.

“It is surprising! The conventional theory suggested a high jump in the exchange rate before the stabilization of the currency market. However, we found a reverse trend in our country. The appreciation has a little impact on inflation as the merchants have already opened letters of credit with costly dollars from the open market,” Dr Mansur, chairman of BRAC Bank, told the Daily Sun.

The economist suggested taking immediate measures to stabilities the money market.

The appreciation of dollar took place for three times within two weeks since the tri-partite meeting among Bangladesh Bank, Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers’ Association (BAFEDA) to discuss ways to control the foreign exchange market.