Interbank dollar price crosses Tk 122 after 2.5 months

• Dollar crosses Tk 122 amid imports
• Central bank purchases push rates higher
• Imports rise nearly 10 percent annually
• Banks accused of profit-driven rate hike

The US dollar strengthened against the taka this week, crossing Tk 122 in interbank trade for the first time in two and a half months, driven by several factors including a slight uptick in import-related letter of credit (LC) openings.

Yesterday, banks sold the dollar at a maximum of Tk 122.25 each, up from Tk 122 the previous day. Prior to this, the greenback traded at a higher rate of Tk 122.5 on August 6, according to Bangladesh Bank (BB) data.

The weighted average rate of the dollar rose to Tk 122.06 each yesterday in the interbank trade, from Tk 121.95, reversing the weakening trend.

"The central bank is now purchasing the dollar at a higher rate. This has pushed up the market rate," said a treasury head of a private commercial bank, seeking anonymity.

The dollar, which gained 43 percent since fiscal year (FY) 2020-21, lost 0.8 percent at the end of this September compared with the end of June. Until October 20, the interbank rate of the dollar hovered around Tk 121.80 each, according to BB data.

The BB, which sold dollars to market until the FY2024-25, has so far bought $2.12 billion from banks in the current fiscal year.

The banker said LC openings for imports have increased slightly. This led to an increase in demand for the greenback and has pushed up the exchange rate.

Imports grew by 9.79 percent year on year to $10.8 billion in the July–August period of the current fiscal year, as per BB data.

Mohammad Ali, managing director of Pubali Bank PLC, said the US dollar rate has risen slightly due to recent pressure from import payments, but the increase is not unusual.

"There is no demand-supply gap," he said, adding that the supply of foreign currency remains adequate.

A senior official of a Chattogram-based top import-oriented conglomerate, seeking anonymity, said there is no valid reason for the dollar rate to increase, but banks have raised it.

 He alleged that banks tend to hike the dollar rate in the last quarter of every year to boost profits.

 In May this year, the BB introduced a market-based exchange rate regime as part of the conditions set by the International Monetary Fund.

 Industry insiders had feared a sharp rise in the exchange rate under the new system, but it has remained stable until recently.