Bangladesh's Foreign Exchange Market Stabilizes
The decline in foreign exchange reserves at the Bangladesh Bank has halted, and the volatility surrounding physical foreign currency has decreased. While the value of the US dollar, which had been on an upward trend for two years, remains relatively stable at a fixed rate, the values of the Euro and the Malaysian Ringgit are now on a downward trajectory. The Indian Rupee has weakened slightly due to India's restrictive visa policy. However, the Thai Baht's demand and value have increased slightly as Thailand continues to issue visas. These observations about the foreign exchange market were made after speaking with various banks and open market traders.
Typically, government changes lead to instability in the foreign exchange market. However, this has not been the case in Bangladesh. Instead, the volatility that had persisted for over two years has subsided. Experts attribute this to the timely policies implemented by the new government and the restricted visa policies of many countries, which have reduced the demand for and value of various foreign currencies. Consequently, the foreign exchange market in the country is becoming more stable.
Bangladesh Bank Governor, Ahsan H. Mansur, met with Dr. Muhammad Yunus, the chief advisor to the interim government, on August 14th. During the meeting, they discussed foreign exchange issues, particularly the dollar shortage, and decided to increase the existing band for inter-bank foreign exchange transactions from 1% to 2.5%. As a result, banks can now set the midpoint price of the US dollar within the crawling peg system between 117 and 120 taka. The prices of other currencies for the next two months were also determined based on this.
According to bank data, the cash rate for the US dollar was 118 taka in July. For the past two months, it has been selling at 120 taka. As of October 30th, banks held 51.4 million US dollars in cash reserves. In the open market, the dollar is selling for as much as 124 taka, up from 123 taka three months ago. However, banks are now providing dollars to customers who present their passports, visas, and tickets. Most Bangladeshi citizens purchase dollars when traveling abroad as dollars are in high demand globally, and they can often be sold at a premium.
Sajib Mia, a currency trader in Motijheel, Dhaka, stated that business is not as good as before, leading to a decline in prices. In fact, the prices of many currencies have decreased, resulting in losses for traders.
According to the Tour Operators Association of Bangladesh (TOAB), India is the most popular destination for Bangladeshi citizens due to the relatively easy availability of visas for medical treatment and tourism, as well as convenient air and road connections. 40-45% of Bangladeshi tourists traveling abroad visit India. Thailand is the next most popular destination, with 15-20% of tourists visiting for medical treatment, shopping, and sightseeing. Other popular destinations include Malaysia, Singapore, and Middle Eastern countries like the UAE, Saudi Arabia, and Oman. Additionally, 5-8% of Bangladeshi tourists visit Europe, Nepal, Sri Lanka, and China.
Following the government change in Bangladesh, India has only been issuing emergency medical visas. Tourist visas to India have been suspended, leading to a decrease in demand for the Indian Rupee. As a result, banks are now providing rupees at the July exchange rate. However, the price of the rupee in the open market has increased by 15 paise in one month, reaching 1 taka 47 paise.
Due to the limited availability of visas, fewer Bangladeshis are traveling to India. For example, US-Bangla Airlines, which previously operated 32 flights per week to India, now operates only 12.
Tour operators report that many tourists are also facing difficulties obtaining visas to the UAE. Obtaining visas to Thailand, Singapore, Indonesia, and the Philippines is also taking a long time. Only Sri Lanka and the Maldives are relatively easy to visit. Due to these changing circumstances, many businesses and travelers have reduced their travel plans. As a result, outbound tourism from Bangladesh has decreased by 75-80%. This has impacted the foreign exchange market.
It has been observed that the Thai Baht, which was 3.40 taka in July, increased to 3.50 taka in September and is now stable at 3.70 taka. The price in the open market is 10 paise higher. The UAE Dirham has increased from 32 taka in September to 32.50 taka, while the Saudi Riyal has increased from 31.60 taka to 32.50 taka, and the Malaysian Ringgit has increased from 26.50 taka to 28 taka.
Asiqul Islam Didar, the proprietor of Trust Money Changer in Gulshan, told The Shuvro Times, "The demand for foreign currency has decreased significantly. As a result, the upward trend in their prices has stopped. On the contrary, the supply of foreign currency has increased due to people returning from abroad. However, our business is currently in a slump.
