After months of persistent uncertainty, volatility in Bangladesh’s dollar market has finally eased, thanks to a targeted intervention by the central bank. Since last Thursday, the US dollar has been trading at a relatively stable rate of Tk 121 for buying and Tk 121.60 for selling in the interbank market — a trend that held steady as of Monday, July 21.
The turnaround comes on the heels of the Bangladesh Bank’s decision to buy USD 434.5 million in two rounds of auctions, a strategic move that appears to have curbed the rapid fluctuations in the dollar-taka exchange rate observed over the past two weeks.A Market in Flux: Recent Movements in the Exchange Rate: Just a week prior, on July 14, the exchange rate had dropped sharply to Tk 119.50 per dollar, signaling increasing pressure on the local currency. The drop caused concern among exporters, remitters, and importers alike, triggering speculation and uncertainty.
The intervention by Bangladesh Bank served to absorb excess liquidity in the dollar market, rebalance supply and demand, and prevent a potentially destabilizing currency appreciation. Since then, the rate has hovered consistently around the Tk 121–121.60 range, restoring a degree of predictability to foreign exchange transactions.
Why the Market Stabilized: The immediate cause of the market correction lies in a combination of central bank action and favorable macroeconomic trends, most notably: Higher remittance inflows, Strong export performance, Disbursement of over USD 5 billion in foreign loans during June. Improved foreign exchange reserve position: According to official data from Bangladesh Bank, the country’s foreign exchange reserves climbed to USD 31.77 billion at the end of June — the highest level in 28 months, since reserves peaked at USD 48 billion in August 2021. The June 2025 figure reflects a solid recovery and marks an inflection point after two years of downward pressure on reserves. This strengthening reserve position has provided the central bank with more firepower to manage liquidity and guide market sentiment, especially as the government navigates post-crisis economic adjustments in line with the International  Monetary Fund (IMF) conditions. Impact of Market-Based Dollar Pricing: It is worth noting that the recent stability comes after the dollar rate was made market-based on May 13, following IMF recommendations under Bangladesh’s Extended Credit Facility (ECF) and Extended Fund Facility (EFF) programs. The policy shift allowed market forces to determine exchange rates, reducing administrative controls.
Initially, the change led to a brief surge in dollar prices, peaking at Tk 122.95, as banks and currency dealers adjusted to the new regime. However, as supply factors improved—especially through record-high remittances and rising exports—the upward pressure on the dollar began to ease naturally.
This shift toward a market-based exchange rate is seen as a long-term structural reform aimed at improving transparency, efficiency, and investor confidence. However, as with any such transition, the path has been volatile.
Expert Reactions: Relief, But Caution: Economic experts and market analysts have generally welcomed the recent reduction in volatility, while warning that sustained stability will depend on continued economic discipline and robust foreign currency inflows.
“The central bank’s timely intervention and improved external sector indicators have helped bring stability to the dollar market,” said a financial analyst. “But we cannot afford to be complacent. Stability must be supported by consistent policy, prudent reserve management, and efforts to sustain the remittance and export momentum.”
Analyst added that the high reserve number is “encouraging” but should be evaluated against upcoming external payment obligations, including debt servicing and import financing. “This is not just about numbers—it’s about liquidity and confidence,” he said. “If the central bank continues to act transparently and predictably, the market will respond positively.”
Key Drivers Behind Reserve Growth: Several factors contributed to the surge in reserves and easing of dollar volatility in June: 
Remittance Boom: Expatriates sent a record $ 30.32 billion in remittances in FY 2024–25 — a 27% increase from the previous year. The surge reflects both formalization efforts and incentives offered to remitters through legal channels.
Export Recovery: Export earnings for FY 2024–25 rose by 8.5%, totaling $ 48.28 billion. The growth was led by apparel, pharmaceuticals, and agricultural products.
Foreign Loans: The government received over $ 5 billion in external loans in June alone, including budget support and project-based disbursements from the World Bank, ADB, and bilateral partners.
Reduced Import Pressure: Imports were moderated due to lingering import restrictions and cautious LC issuance, allowing the central bank to accumulate reserves rather than spend them.
Challenges Ahead: Despite the current calm in the currency market, challenges remain. Economists have pointed to several risk factors that could trigger renewed volatility: Rising global interest rates, especially in the US and EU, may reduce capital inflows and remittances. Potential oil price shocks due to geopolitical tensions could increase import costs. Slowdown in garment orders during the second half of 2025 could reduce export earnings. Debt repayments on foreign loans will begin to intensify from 2026 onwards. 
“The government must now focus on improving the investment climate to attract more FDI and diversify exports,” said Dr. Selim Raihan, Professor of Economics at Dhaka University. “While this stability is a positive signal, it must be leveraged to build long-term resilience.”
Banking Sector Response: Bankers also expressed relief at the central bank’s intervention and the improved market environment. “The situation has definitely calmed. Banks can now plan better,” said Syed Mahbubur Rahman, Managing Director of Mutual Trust Bank and former Chairman of the Association of Bankers Bangladesh (ABB). “The previous swings were too steep, making pricing and LC settlement extremely difficult.”
However, he urged the central bank to maintain a consistent intervention strategy, cautioning against excessive tightening or loosening that could trigger renewed speculation.
Way Forward: Consolidating Gains: With the dollar market now stable, policymakers are expected to focus on: Gradually removing remaining import restrictions to boost economic activity. Continuing market-based exchange rate adjustments with safeguards. Enhancing remittance incentives and reducing transaction costs. Strengthening forex reserve buffers through a mix of FDI, aid, and exports. Improving data transparency and communication with the market. According to Bangladesh Bank, they will continue to monitor the dollar market closely and act as needed to prevent excessive fluctuations. A spokesperson confirmed that further auctions may be held if needed to maintain market order.
The recent decline in dollar market volatility offers a much-needed reprieve for Bangladesh’s economy, which has been under pressure from external shocks and domestic imbalances for the past two years. With a rising reserve, strong remittance inflows, and export resilience, the country is now better positioned to navigate future uncertainties. But experts agree that the road ahead requires continued vigilance, structural reforms, and strategic policymaking. The current calm in the currency market, though welcome, is only a step toward long-term stability — not the end of the journey.