2022-05-19 16:54:16 BdST
BAFEDA acts to tame forex volatility
The apex body of Bangladesh's dealer banks decides to tell its members to maintain a benchmark in quoting foreign-currency-exchange rates to the overseas exchange houses engaged in remitting money.
The move is aimed at reining in the ongoing exchange-rate volatility on the country's money market, sources say.
The decision was made in an emergency meeting of Bangladesh Foreign Exchange Dealers' Association (BAFEDA) executive committee, held at the Sonali Bank headquarters in Dhaka on Wednesday with its chairman Ataur Rahman Prodhan in the chair.
Under the decision, the exchange rate for overseas exchange houses to be quoted by the banks will be less by Tk 0.10 per US dollar from inter-bank rate.
"We've discussed the overall foreign-exchange market situation at the meeting," a BAFEDA spokesman said.
Mr Prodhan, also managing director and chief executive officer of the state-owned Sonali Bank, said the BAFEDA will send a letter with some suggestions to its members and the Bangladesh Bank (BB) as early as possible.
The BAFEDA has made the latest move aiming to ensure a healthy competitive atmosphere on the foreign-exchange (forex) market through introducing a uniform-rate-quoting system to the overseas exchange houses.
Currently, some commercial banks are quoting unusually high rates to the overseas exchange houses to attract more inward remittances and these rates are also responsible for creating the market volatility, according to market-insiders.
They also said some banks offer higher rates ranging between Tk 91 and Tk 94 for netting remittances from the overseas exchange houses bypassing the inter-bank rate or BC (bills for collection) selling rates.
The US currency was quoted at Tk 87.50 each on the inter-bank market on Wednesday--unchanged from the previous level--while the rate for the sale of bills for collection, generally known as BC, was Tk 86.75.
Earlier, the central bank had asked the bankers to quote foreign- currency-exchange rates to the overseas exchange houses after applying due diligence and considering the situation on the inter-bank forex market.
Sources, however, said the BAFEDA will also request its members to avoid encashment of export proceeds of other banks' clients to avoid market waywardness.
On the other hand, the central bank is providing the foreign-currency liquidity support to the banks continuously on a priority basis to settle their import-payment obligations.
As part of the remedial move, the BB sold $80 million directly to six scheduled banks on Wednesday to help in settling import payments.
The central bank has so far sold $5.39 billion from the reserves directly to the commercial banks as liquidity support for settling their import-payment obligations in the current fiscal year (FY), 2021-22.
Bangladesh's market witnessed a volatile situation mainly due to higher outflow of foreign exchange following 'hefty growth' in import payments compared to the inflow in the last few months.
Meanwhile, exchange rate of cash dollar against the local currency on the open market, known as kerb market, eased slightly, pushing down below Tk 100 on Wednesday.
The US currency rate came down to Tk 97 each on the day from Tk 102 of the previous day, currency traders said.
"The cash dollar rate is likely to fall further in the coming days," a senior trader said, without elaborating.
Sources, however, say the demand for cash dollar eased slightly on Wednesday because of higher price of the greenback on the kerb market.
The rate of the greenback may rise ahead of the upcoming holy Hajj if the lower supply of the US currency to the market continues, they predict.
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