The inter-bank exchange rate of dollar rose by 0.68 percent from Monday's to Tk 65.70 yesterday and the nationalised commercial banks (NCBs) increased it by 0.93 percent or Tk 0.60 for export, import and remittance for customers.

The Bafeda meeting at its office intended to fix the dollar price saw strong opposition from all the foreign and some private banks, who argued it would be quite contradictory to the market based exchange rate system, meeting sources said. The meeting ended without any decision made.

The opposition said, if the rate is fixed, it would only create more cartels in the market. They also wanted to know who would supply dollars in the market in a fixed price regime.

A meeting source quoted the representatives of the foreign and local private banks as pointing out that if Bangladesh Bank (BB) wants the exchange rates of dollar to be fixed then it should issue a circular towards that end. "Bafeda can't impose any fixed rate in the free-float market," the source quoted them as saying.

"Many disagreed with the idea, saying no one should fix the rates in the market based exchange rate system," Bafeda President and Sonali Bank Managing Director M Tahmilur Rahman told newsmen after the meeting.

As we could not make any unanimous decision, he said, "We will sit again next Tuesday to discuss the issue and hopefully we will strike an accord."

Sources said the meeting also deliberated on ways to keep the forex market stabilised without any direct interference of the Bafeda.

However, the bankers at the meeting agreed to try to keep the highest selling rate of dollar at Tk 66 in inter-bank transactions and Tk 65 in remittance for the next one week from today. They also will try to keep the dollar price difference between the banks within Tk 0.50.

The Bafeda today will send the minutes of the meeting to the treasury heads of all commercial banks.

Since January 1 to yesterday, the local currency has depreciated by 7.59 percent against dollar, making the government and the central bank worried over its adverse impact on inflation.

In face of the nagging dollar crisis, the country's foreign exchange reserve is also depleting fast. From $2.9 billion on July 16 the reserve slumped to $2.829 billion on Sunday last. It was $3.169 billion on July 14.

A commitment made to International Monetary Fund prevents the BB from interfering in the foreign exchange market and taking any direct measure to halt the ongoing dollar price hike.

However, after the first-ever meeting of the high-powered fiscal co-ordination council early last week, where the dollar price spiral featured prominently, the BB took some indirect steps to stabilise the forex market.

As per the central bank's informal instructions, the Bafeda and the Association of Bankers, Bangladesh held meetings on the issue and took a number of decisions to rein in price spiral.

The Asian Development Bank's Quarterly Economic Update released Sunday said higher oil prices in the international market have posed major risks to the balance of payments, reduced the foreign exchange reserve available for other essential imports and put pressures on the reserves and the exchange rates.

According to the update, the exchange rate of taka experienced increased pressures and exhibited significant volatility due mainly to a rapid growth in imports relative to export growth, aided by the sharp rise in private sector credit. This resulted in the taka depreciating by about 5 percent between December 2004 and June 2005.