The New Nation - Internet Edition

Pulack Ghatack

Bangladesh Bank (BB) is injecting foreign currency into the commercial banks to enable them to pay key import bills without destabilising the currency market.

The central bank provided US$41 million during the last week to help commercial banks clear import bills of oil and other essential items of their clients.

The central bank will continue to provide such foreign currency support to the commercial banks mainly for making import payments of essential items, including fuel oils, officials in the central bank said.

This will help import of essentials items undisturbed, and will ultimately help taming inflation, an official of the central bank told this correspondent.

"Our aim is not to keep Taka overvalued or undervalued against the Dollar, we are mainly keeping the market stable," he said.

Meanwhile, a money market analyst of a commercial bank said, |"the inter-bank foreign currency market is remaining largely stable for a quite long time with the taka appreciating a little."

According to BB statistics the buying and selling rate of US dollar was Tk 68.52 yesterday which has been varying from Tk 68.48 to Tk 68.53 over the week.

The central bank was trying to weaken US dollar against Taka by increasing the inflow of foreign currency in the market to keep it steady.

Depreciation of Taka is distasteful to importers and consumers in the country as it results in price rise in the highly import-dependent commodity market with an increased import cause.

But, export earners and overseas remitters hail it, for a strong dollar helps them adding more Taka with their foreign currency income.

Apparel exporters are saying that the dollar fell by over 4 per cent to an average of Tk 67 (depending on the terms of exports) at present, compared to Tk 70 plus they negotiated end of 2006.

While talking to The New Nation, president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Fazlul Hoque said that it would be extremely difficult to maintain the export growth if dollar falls further, even by only one taka.

Bangladesh's exports and remittances were about US$14 billion and US$8 billion respectively in 2007-08.

Some economists claim that the local currency was slightly overvalued against the US dollar since early June. But there is also strong plea from the others who say price of Taka should be increased further to make import of essentials easier.

However, the central bank is intervening into the inter-bank foreign exchange market by buying and selling US dollar directly to cheque market volatility.

As part of the intervention, the central bank has bought US $9.50 million from the commercial banks last week. Last December, the central bank also purchased at least $37 million from the commercial banks as part of its policy intervention.

The central bank has started intervention in the market by selling the US currency directly to the commercial banks since October 29, 2007 to keep the market steady. The central bank of Bangladesh has since sold US $735 million to the commercial banks as part of its intervention in the market, the officials confirmed.

BB officials are saying that the apparel exporters have no reason to be scared as the dollar weakened against almost all currencies, including those of Bangladesh's competitors in the sector.

Moreover, there is a sign of depreciating the Taka against dollar in the coming months as the market would see rising demand for the greenback to settle the increased L/Cs opened last fiscal year.

According to latest figures from Bangladesh Bank, L/C opening increased by 45 per cent to US$ 24.44 billion during the last fiscal year as compared to the previous fiscal year (2006-07).

"Exporters may be facing some pressure for a while but the market trends show it would turn to their favour in the coming months," said the market analyst, requesting anonymity.