Bangladesh Bank’s $539 million dollar purchase through auctions in under a month aims to stabilize the taka, safeguard remittance flows, and protect export competitiveness. Experts hail this bold move as a game-changer for the economy.
Bangladesh Bank Intervenes to Stabilise Currency Markets
In a decisive bid to curb the depreciation of the US dollar against the Bangladeshi taka and bolster the nation’s remittance and export sectors, Bangladesh Bank (BB) has purchased a staggering $539 million through four auctions in less than a month.
The latest auction, held yesterday, saw the central bank acquire $45 million at a rate of Tk121.35–Tk121.50. This follows a smaller purchase of $10 million on 23 July at a cut-off rate of Tk121.95, reflecting a reduction of at least 45 basis points.
This unprecedented intervention began on 13 July, when BB made history by buying $171 million in its first-ever dollar auction. Just two days later, it purchased an additional $313 million, both at Tk121.50.
Why Bangladesh Bank is Buying Dollars Now
Central bank officials stress that the move aims to set a “signal rate” for the market, preventing both rapid appreciation and depreciation of the dollar. A senior member of BB’s auction committee explained that while banks offered to sell nearly $100 million, the central bank purchased only what was needed to keep the exchange rate stable.
“We are taking necessary steps to support exporters and remitters while ensuring stability in the foreign exchange market,” the official said.
The Economic Context: Excess Dollar Inflows
Interestingly, Bangladesh’s banking sector is currently experiencing an excess supply of dollars a rare scenario for many developing economies. A deputy managing director of a leading private bank revealed that monthly inflows average $6.5 billion, with $2.5 billion from remittances and $4 billion from exports.
Meanwhile, monthly import bills have fallen to $4–$4.5 billion, largely due to reduced investment-related imports. This surplus has been pushing the dollar rate down, prompting BB to act swiftly to avoid destabilising impacts on the economy.
Expert Support for the Central Bank’s Intervention
Economists and banking leaders have welcomed BB’s cautious yet proactive measures. Naser Ezaz Bijoy, CEO of Standard Chartered Bank Bangladesh, called the intervention a “necessary stabiliser” for the economy.
“By purchasing US dollars through auctions, the central bank is incentivising remittance flows through formal channels while safeguarding export competitiveness,” Bijoy explained.
He cautioned that a sharp fall in the exchange rate could trigger harmful side effects, such as:
- Reduced remittance inflows via banking channels due to increased informal transactions through hundi networks.
- Exporter losses when forward pricing assumptions are disrupted by sudden currency movements.
“Maintaining exchange rate stability is essential for sustaining both remittance inflows and export revenues,” he stressed.
Policy Experts Advocate for a Balanced Exchange Rate
Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD), echoed the sentiment, emphasising that Bangladesh’s foreign exchange market is not yet mature enough for a free-floating currency regime.
“Many developing countries follow similar strategies,” she noted. “If the dollar rate is high, it encourages remittance and export earnings. If it’s too low, imports surge. The ideal exchange rate policy is one that balances these competing interests.”
Khatun described BB’s intervention as a precautionary measure to shield the economy from potential shocks and to maintain macroeconomic stability.
Global Context: Central Bank Currency Management
The practice of central banks intervening in currency markets is not unique to Bangladesh. Around the world, monetary authorities frequently buy or sell foreign currency to influence exchange rates, manage inflation, and protect domestic industries.
Bangladesh’s move aligns with strategies seen in emerging markets like India, Indonesia, and Vietnam, where exchange rate volatility can have outsized impacts on trade balances and capital flows.
The Road Ahead: Stability as a Growth Driver
The central bank’s measured approach reflects an understanding that abrupt currency movements either up or down can harm long-term economic growth. For exporters, a stable dollar rate provides predictability in pricing and competitiveness. For remitters, it ensures their earnings maintain value when sent home.
With global uncertainties, including shifting commodity prices and fluctuating interest rates in major economies, Bangladesh’s proactive currency management could serve as a model for other developing nations facing similar challenges.
Conclusion: A Strategic Win for Bangladesh’s Economy
Bangladesh Bank’s $539 million dollar purchase through auctions is more than just a monetary policy move it’s a strategic safeguard for the country’s economic stability. By preventing a steep fall in the dollar rate, BB is protecting remittance flows, export competitiveness, and investor confidence.
As experts agree, exchange rate stability is not merely about numbers it’s about sustaining livelihoods, promoting fair trade, and ensuring that the nation’s economic engine keeps running smoothly.
