Bangladesh Bank has stepped into the domestic foreign exchange market to purchase 50 million US dollars from commercial banks through an auction, ending a hiatus of nearly three and a half months. The central bank intervened on Tuesday afternoon following an influx of dollar liquidity that had begun driving down exchange rates.
Spokesman Arif Hossain Khan confirmed the market operation, marking the central bank’s first acquisition of greenbacks from commercial lenders since 20 May.
Trading opened on a quiet note on Tuesday morning across dealing desks. Commercial banks were initially sourcing remittance dollars from overseas exchange houses at rates between Tk 122.30 and Tk 122.40 per dollar. Settlement rates for clearing import liabilities through letters of credit (LCs) hovered between Tk 122.50 and Tk 122.60.
The market momentum shifted swiftly around midday after Bangladesh Bank announced it would acquire dollars at a fixed price of Tk 122.75. The announcement provided a direct price floor for the currency. By late afternoon, several commercial lenders adjusted their trading positions to match the central bank’s benchmark for both remittance acquisition and import settlements.
Treasury officials highlighted an unusual delay in the central bank’s communication. Bangladesh Bank notified commercial lenders of the auction around 1:00 pm, whereas such market directives are typically communicated early in the morning. Because of the afternoon timing, banks had already cleared early import obligations for corporate clients at the lower prevailing rates established earlier that morning.
Central banks routinely participate in the foreign exchange market to manage liquidity. When dollar supplies swell relative to demand, buying excess currency allows authority figures to mop up liquidity while simultaneously bolstering official foreign exchange reserves. Conversely, when market shortages emerge, central banks sell dollars from their reserves to cushion local currency depreciation.
Tuesday’s purchase addresses sharp short-term volatility in the domestic market. Exchange rates dipped near Tk 122 per dollar a fortnight ago before climbing abruptly to Tk 123.65 late last week—a shift of nearly one and a half Taka in a very brief window.
This rapid fluctuation presents serious planning challenges for businesses. Importers face shifting cost calculations when exchange rates move between the opening of an LC and its eventual settlement. Exporters and remittance handling institutions similarly face operational uncertainties.
In response to this volatility, an increasing number of corporate clients are turning to forward booking arrangements. By securing foreign currency contracts at predetermined rates for future dates, businesses are taking proactive measures to hedge against unexpected exchange rate surges and lock in predictable import costs.
Ultimately, Bangladesh Bank’s $50 million absorption serves a dual purpose. Beyond expanding state foreign currency reserves, the intervention establishes a firm price benchmark, signalling to commercial lenders where the central bank expects exchange rates to anchor.