Bangladesh Bank to intervene in forex market to curb volatility

Bangladesh Bank (BB) plans to intervene in the foreign exchange market to curb volatility in the exchange rate and rebuild the country's foreign exchange reserves.

The move, announced in BB's latest Monetary Policy Statement for the first half of fiscal year 2025-26, comes amid continued pressure on the Taka due to persistent inflation, a widening trade imbalance, and external headwinds, including recent tariff actions by the United States.

The central bank reaffirmed its commitment to a flexible exchange rate regime but said it would adopt a more proactive approach to ensure market stability.

"In this regard, consistent with the flexible exchange regime and to rebuild foreign exchange reserves, BB will intervene in the foreign exchange market to curb volatility in the exchange rate and ensure greater stability," the central bank said in the statement.

In May 2025, BB transitioned to a more flexible exchange rate regime aimed at enhancing stability in the foreign exchange market.

The central bank said the regime remains essential for facilitating smoother adjustments to external imbalances, easing market pressures, and preserving reserves.

While BB remains committed to flexibility, it retains the option to intervene to smooth out excessive fluctuations. This marks a more pragmatic shift as the central bank seeks to contain inflation and anchor market expectations without reverting to a fixed exchange rate system.

BB also acknowledged that greater exchange rate flexibility is necessary to offset the impact of declining export demand amid rising global trade tariffs.

To ensure transparency, the central bank publishes a reference exchange rate twice daily, which acts as a benchmark for market price discovery.

Its continued commitment to a flexible exchange rate regime is aimed at ensuring exchange rate stability and rebuilding reserves to better withstand external shocks, the statement added.