Bangladesh's foreign exchange market is experiencing renewed pressure as global geopolitical tensions and supply-side constraints continue to push the US dollar higher, weakening the value of the Bangladeshi taka and raising concerns among importers, bankers, and policymakers.
The dollar used for settling import letters of credit (LCs) has climbed to around BDT 123.50, marking an increase of nearly BDT 1.20 compared to roughly one and a half months ago. In the cash market, banks are now trading dollars at rates exceeding BDT 124.50, reflecting heightened volatility in the currency market.
The situation has been further complicated by the central bank's return to dollar purchasing activities after a brief pause, a move that has triggered debate among market participants over whether such
interventions may intensify pressure on the local currency. Rising Import Costs Drive Dollar Demand: Market analysts attribute the recent surge in dollar prices primarily to rising import demand and global economic instability linked to ongoing geopolitical conflicts. Increased costs of energy, raw materials, and transportation have intensified pressure on Bangladesh's import payments, pushing up demand for foreign currency. According to commercial banking data, several leading banks are now settling import LCs at rates between BDT 123.25 and BDT 123.50 per dollar, while cash dollar sales in some cases have crossed BDT 124.75. NRB Bank reportedly sold import dollars at BDT 123.50, while Dhaka Bank settled import transactions at around BDT 123.40. BRAC Bank, Jamuna Bank, and Standard Chartered Bank have also been executing import settlements in the range of BDT 123.25 per dollar. Bankers note that the effective market rate is often higher than publicly disclosed figures, as importers are frequently required to pay additional premiums due to supply constraints.
Central Bank Returns to Dollar Buying: After a pause of approximately six weeks, Bangladesh Bank has resumed purchasing dollars from commercial banks through auction mechanisms. In the latest operations, the central bank purchased around USD 12 million over two days from multiple banks. On the most recent trading day, approximately USD 5 million was purchased at a rate of BDT 122.75 per dollar. A day earlier, around USD 7 million was acquired at the same rate. Earlier in March, the central bank had purchased dollars at BDT 122.30, indicating a depreciation of around BDT 0.45 in the taka within a short span.
Officials say the intervention aims to stabilize foreign exchange reserves ahead of upcoming large external payment obligations, including import settlements under the Asian Clearing Union (ACU).
However, market observers argue that such purchases, while necessary for reserve management, may tighten dollar liquidity in the banking system and contribute to further upward pressure on exchange rates.
Pressure on Remittance Market: One of the key factors influencing the current foreign exchange dynamics is the rising cost of remittance inflows. Exchange houses and banks are reportedly offering higher rates to attract remitted dollars, with prices now approaching BDT 123 per dollar. Previously, remittance dollars were available at around BDT 122, but intensified competition among banks has pushed acquisition costs higher. This has directly impacted import financing, as banks pass on increased costs to LC settlements.
A senior banker, speaking to The Daily Industry, explained the mechanics behind the shift. "Global uncertainty has tightened dollar availability across informal and formal channels," said Mahmudur Rahman, Deputy Managing Director of a leading private commercial bank. "As a result, banks are now forced to offer higher rates to secure remittance inflows, which ultimately affects import settlement pricing. The market is adjusting rapidly, and volatility is now embedded in the system."
Concerns Over Policy Consistency: The central bank recently stated that the foreign exchange market remains "stable and balanced," citing steady remittance inflows and manageable import payments. It also highlighted that reserves stood at approximately USD 34.35 billion earlier this month, suggesting no immediate crisis in external liquidity.
However, the decision to resume dollar purchases shortly after such assurances has raised questions among economists about policy consistency and market signaling.
A senior official from Bangladesh Bank, requesting anonymity, defended the intervention.
"The central bank operates based on market supply and demand conditions," the official said. "At times, we purchase dollars to prevent excessive appreciation of the taka, and at other times we allow market adjustment. The recent increase in import settlement rates reflects reduced dollar availability rather than any artificial manipulation."
The official added that the reference purchase rate of BDT 122.75 is now being used as a benchmark by commercial banks in pricing import settlements.
Expert Views on Currency Pressure: Economists and financial analysts have expressed mixed views regarding the recent developments.
Dr. Shirin Akhter, Professor of Economics at the University of Dhaka, warned that continued intervention in the foreign exchange market could create short-term distortions.
"Bangladesh is currently facing a dual challenge: managing reserves while also ensuring adequate liquidity in the market," she told The Daily Industry. "When the central bank enters the market as a buyer, it can unintentionally reduce available dollar supply for commercial banks. This leads to higher LC settlement rates, which ultimately feed into import inflation."
She further noted that global geopolitical tensions are exacerbating the situation. "Energy prices, freight costs, and global supply chain disruptions are all contributing to a structural increase in import bills. Bangladesh cannot fully insulate itself from these pressures."
Banking Sector Signals Tight Liquidity: Bankers say the dollar market has become increasingly competitive, with commercial institutions competing aggressively for limited inflows of foreign currency.
Fahim Uddin, Chief Foreign Exchange Officer at a multinational bank operating in Dhaka, said liquidity conditions are tightening.
"We are observing a clear mismatch between dollar inflows and outflows," he said in comments published by The Daily Industry. "Remittances are steady but not sufficient to fully offset import demand. As a result, banks are forced to source dollars at higher rates, which increases the overall cost of trade financing."
He added that if the central bank continues purchasing dollars at current levels, short-term volatility could persist. "While reserve management is important, timing and scale of intervention must be carefully calibrated to avoid market overheating."
Importers Feel the Squeeze: Import-dependent businesses are already feeling the impact of rising exchange rates. Traders report higher costs for raw materials, machinery, and consumer goods, which may eventually translate into increased domestic prices.
A leading importer of industrial goods noted that LC settlement costs have increased significantly in recent weeks. "Even a small movement in the exchange rate affects our total import bill," he said. "We are now planning purchases more cautiously due to unpredictable dollar pricing."
Industry leaders warn that sustained currency depreciation could add inflationary pressure at a time when households are already struggling with rising living costs.
Reserve Management Strategy Under Scrutiny: The central bank's decision to accumulate dollars ahead of upcoming ACU payment cycles has been described as a precautionary measure aimed at maintaining reserve stability.
According to officials, Bangladesh is preparing for large external obligations, and smoothing reserve fluctuations is a priority. However, economists caution that timing such interventions during periods of already tight liquidity may amplify market stress.
Rezaul Karim, Senior Fellow at the Bangladesh Institute of Financial Studies, emphasized the need for a balanced approach.
"Reserve adequacy is important, but so is market stability," he told The Daily Industry. "If the central bank aggressively buys dollars during a period of weak inflows, it can unintentionally accelerate depreciation pressures on the taka. Policy coordination is essential."
Outlook Remains Uncertain: Market participants expect continued volatility in the foreign exchange market in the coming weeks, particularly if global geopolitical tensions persist and import demand remains strong.
While Bangladesh's reserves remain above the critical threshold, the combination of rising import costs, competitive remittance pricing, and central bank intervention is creating a complex policy environment.
For now, businesses, banks, and policymakers are closely watching exchange rate movements as the taka navigates one of its most challenging periods in recent years.
