The New Nation - Internet Edition

While the world currency market is still recuperating from the shock of US suprime crisis, soaring oil prices and geo-political turmoil, 2007 was rather a low key year for the local foreign exchange market There was no major gyration in the local forex market with rates being range bound for most of the year. The USD hovered mostly between BDT 69.0069.50, while reaching the peak of BDT 70.93 in January.

USD/BDT started the year with a bang marching momentarily upward to subside from February onwards. Price of dollar showed a modicum of movement in first half of 2007, supported by a marked increase in wage earners' remittance. Fall in commodity imports (food grain, edible oil) in H1 07 also abetted the stable USD/BDT.

Stability of USD-BDT was challenged in the second half of 2007 when the economy had to battle with two major floods. In October the demand for dollar was fuelled by higher import of food grains and petroleum, which reached a record peak of $99.29 a barrel in the international market The Central Bank facilitated the market liquidity with injection of ample funds. Since then, dollar has been extremely steady with the year end inflows of foreign aid on account of Cyclone Sidr.

A positive balance of payment coupled with record wage-earners remittances also helped keep the USD/BDT market stable. While both import and export registered a growth of around 15-16%, remittance registered a record growth of 25% to $ 6 Bio. The remittance flow helped to increase the FX reserve above USD 5 Bio for the first time.

The steady dollar taka throughout 2007 could not fully insulate importers of capital machinery as dollar plunged against most major currencies in the international market Dollar hit record lows against Euro and multi-year lows against other currencies driven by overall slowdown in US economy coupled with weakness in the housing sector that turned into what is now known as the US Subprime crisis. Rate cut by US Federal Reserve has hurt the dollar further as investors shifted to higher yielding currencies. Euro had climbed steadily this year, gaining more than Taka 10 in just 3 months mostly on back of Euro-dollar appreciation. Overall Euro had appreciated around 16% against BDT through the course of the year. Rising Euro has had telling effect on businesses involved in capital expenditures, as most of the machineries are imported from Europe. Steady rate of USD has also meant very little activity in the forward market Importers were content with steady rates and ample supply of Dollar. On the cross currency front some importers showed interest in hedging their cross-currency exposures.