In a strategic move to support the local currency and manage foreign exchange stability, Bangladesh Bank (BB) has purchased $313 million from commercial banks in its second dollar auction within just three days. This follows an earlier intervention where the central bank bought $373 million, bringing the total to $686 million over a very short span. These back-to-back auctions reflect Bangladesh Bank’s active role in reducing pressure on the foreign exchange market while ensuring liquidity in the banking system. The purchases are aimed at balancing the demand and supply of dollars, especially as import payments continue and remittance inflow remains steady. The dollar auction mechanism, introduced as part of the central bank’s cautious shift to a market-driven exchange rate, enables BB to intervene without fixing the rate artificially. By absorbing excess dollars from banks, the central bank provides them with local currency liquidity, which can then be used to support domestic lending and reduce inflationary stress. In recent months, the exchange rate has been under pressure due to a combination of external and internal factors. These include high import bills, global interest rate trends, and shifts in remittance flow patterns. While the central bank has been gradually adjusting the exchange rate through the crawling peg system, these dollar purchases help prevent sudden volatility and reassure the market. The recent auctions have involved participation from over 20 banks, indicating the availability of foreign currency in the banking sector despite earlier constraints. This is a positive sign for the economy, suggesting that remittances and export earnings are regaining momentum. The central bank’s actions also signal its readiness to support the local currency while maintaining market confidence. Economists note that this intervention aligns with Bangladesh Bank’s dual objectives—maintaining monetary stability and facilitating smooth external transactions. By strategically buying dollars, BB can also manage its reserve levels, which are crucial for securing international loans and boosting investor confidence. Moreover, such moves are expected to ease dollar shortages in the open market, which have affected importers and travelers. A more stable exchange rate benefits not only financial institutions but also the broader business community by reducing uncertainty in cross-border trade. Bangladesh Bank’s ongoing measures to manage exchange rate volatility show a proactive, flexible approach in navigating complex global financial dynamics. As the country continues its economic recovery, the central bank’s interventions are playing a vital role in preserving financial discipline and protecting macroeconomic stability.
