The foreign exchange market in Bangladesh is experiencing a surge in liquidity due to an increase in the influx of US dollars.
According to data from Bangladesh Bank, banks’ net open position (NOP) in foreign exchange reached $606 million on March 11. This marks a significant shift from being $40 million in the negative at the beginning of January.
Industry experts attribute this rise in NOP to the growing inflow of US dollars, indicating a stabilizing foreign exchange market.
Remittance inflow saw a notable 39 % year-on-year increase in February, reaching $2.16 billion, the highest in eight months. Meanwhile, exports for January and February combined totaled $10.91 billion, the highest in those two months.
The central bank’s currency swap deal, introduced in February, also contributed to the surge in foreign exchange inflow. Under this arrangement, commercial banks can obtain local currency from the central bank in exchange for US dollars for periods ranging from seven days to 90 days.
The increased inflow of US dollars has also impacted the exchange rate against the taka in the curb market, with dealers now selling each US dollar at Tk 120 and buying at Tk 118 to Tk 119, down Tk 4 to Tk 5 from the previous week.
Import payments during the July-January period of this fiscal year stood at $36.02 billion, down from $44.02 billion in the same period of the previous fiscal year.
As a result of these developments, there has been increased liquidity in the local currency market, with banks now seeking liquidity support from the central bank under the currency swap deal.