Exchanges Rate

Exchange Rate Regimes in Bangladesh

The rate at which one currency is exchanged for another currency in the foreign exchange market is called exchange rate. Until recent past, fixed exchange rate system was prevailing in Bangladesh in which case the central bank of the country could devalue the local currency. To better protect the external competitiveness of Taka and to enhance the resilience of the economy in responding to shocks, Bangladesh formally stepped over to market based exchange rate for the Taka from 31st May 2003 (Annual Report, BB, 2002-03). In this new system, the nominal exchange rate is set by the market forces but keeps discretion for the central bank to intervene in the foreign exchange market to keep the rate within certain limit of appreciation or depreciation. This is known as ‘managed float’ system. In this system, demand and supply primarily determine the exchange rate on a particular day. But Bangladesh Bank comes forward to keep the exchange rate within a certain limit of appreciation or depreciation by selling or buying the foreign currencies or by adopting some other measures.

Floating Exchange Rate in Current Account

In the year 2000, BB relaxed foreign currency dealing, allowing authorized dealers to transact dollars with Bangladeshi Bank. Earlier the banks were obliged to transact at certain fixed rates. In 2002, MOF has reformed exchange rate policy further. Foreign exchange in current account has been made free floating. The Bank officials believe that a decision of allowing market to decide exchange rate in current account has help curb hundi business in a significant scale.

Remittance Data and Monitoring

BB maintains data on remittance transfer since 1972. Recently, it has introduced a method of weekly (provisional) data collection for understanding the trend of remittance. Currently, datasheets are prepared on bank and country wise. BB analyses and interprets the reports to identify remittance trends like increase or...