In November, Bangladesh experienced a resurgence of turbulence in its dollar market. Over the course of 11 months this year, the exchange rate for the dollar from the bank to the kerb market surged by Tk22.65, driven by a shortage of greenbacks.
According to the Bangladesh Bank's website, the dollar exchange rate between the inter-bank and the customer was set at Tk104.35 on January 2 of this year.
Subsequently, this rate incrementally rose, reaching Tk115 on November 9, in accordance with the remittance rates established by the Association of Bankers, Bangladesh (ABB), and the Bangladesh Foreign Exchange Dealers' Association (Bafeda).
However, there were reports earlier this month indicating that some banks had acquired remittances at a higher price of Tk124.
According to the guidelines of ABB and Bafeda, banks cannot sell dollars at a price higher than Tk111.
After such instructions, dollar sales in banks stopped last week and on the other hand, the kerb market started to heat up.
From the final working day of the past week (November 9) until the morning of the current week's first day (Sunday, November 12), the dollar exchange rate experienced fluctuations, reaching up to Tk127.
To illustrate, a customer who could purchase dollars from the bank at a rate of 104.35 taka in January of this year found themselves having to buy dollars at Tk127 from the end of last week to the beginning of this week in November, owing to a scarcity of dollars from both banks and money changers.
This signifies that over the 11 months of this year, the difference in the dollar exchange rate surged by Tk22.65. In January 2023, the dollar's exchange rate stood at Tk110 in the Kerb market. However, there has been a consistent decline since Sunday afternoon, and by Monday afternoon (November 13), the greenback had dropped by Tk10, settling at Tk117.
Regarding the sudden volatility in the dollar market, Secretary General of the Money Changers Association of Bangladesh, Helal Uddin Sikder told Dhaka Tribune that: “We were not able to buy dollars last week when banks were buying remittances at higher prices. But when the banks were instructed that even if they bought remittance at a higher price, they could not sell the dollar at more than Tk111, they then stopped selling the overpriced dollars. Meanwhile, we (the money changers) did not have any dollars in hand. As a result, it has some effect on the open market. But that has fallen due to Bangladesh Bank and our surveillance.”
This money-changer does not have much reason to worry about the sudden hike of the dollar in the kerb market.
He said: “When there is a sudden crisis in the dollar market, brokers trade up to Tk4-10 per dollar. Which is not possible for valid license holders, but this kerb market transaction is not too much. They traded Tk15,000-20,000 worth of dollars in a day. I don't think there is much to worry about. But surveillance must be maintained,” he explained.
Asked about the buying and selling dollar rate of Monday, he informed: “Now (Monday afternoon), we are buying dollars at Tk115.50 and selling it at Tk117.”
Regarding sudden volatility in the dollar market, Md Mezbaul Haque, executive director and spokesperson of the Bangladesh Bank, said after Thursday's meeting that the dollar market has become unstable after the announcement of incentives to the banks from their own funds. As each bank gives different incentives, the market has been rattled.
Banks had assured us not to buy dollars beyond the rate set by Bafeda, he added.
Meanwhile, bankers expressed relief as remittance prices have decreased marginally, but they noted that the dollar crisis in banks had not abated.
They linked the anomalous behaviour of some banks and the profit-driven strategy of exchanges to the substantial jump in the dollar price of remittances in the last two days of the previous week.