BB continues to buy more dollars in auction for market stabilization

Business Report :

Bangladesh Bank has purchased another $129.5 million at Tk121.75 per dollar from commercial banks in its latest effort to stabilize the foreign exchange market amid signs of excess supply.

With the latest intervention on Monday the central bank has, so far, bought US dollars amounting to $1.88 billion through auctions.

Earlier, On September 15, $353 million BB has been bought from more than 10 banks with exchange rates ranging between Tk121 and Tk121.75 under the Multiple Price Auction method.

On 9 September, Bangladesh Bank purchased $265 million from commercial banks through another auction with a cut-off rate of Tk121.70.

In the mid of July month the exchange rate of the American greenback continued to fall against the local currency.

To tackle the sharp fall, the banking regulator on July 13 bought $171 million from 18 commercial banks through an auction – the first such move under the floating rate system.

Earlier, in May, BB adopted a floating exchange rate regime to meet conditions tied to a $5.5 billion IMF loan programme, a year after introducing a crawling peg system under which the exchange rate moved within a band.

A senior official of the central bank told The New Nation that BB has intervened in the market by purchasing US dollars from commercial banks through an auction aiming to keep the exchange rate of the BDT against the greenback stable.

He also said the central bank will sell the US dollar to banks through similar auction if the exchange rate of the greenback increases against the local currency.

“We may consider intervening in the market whenever necessary for ensuring the exchange rate of the US dollar against the local currency remaining stable,” he added.

Some experts, however, criticized the central bank’s move amid high inflation in Bangladesh, arguing that allowing the dollar rate to drop further could help contain inflation.

Bringing the rate down from Tk 120 to around Tk 110 could have made a remarkable difference in taming inflation.