Taka weakening against major foreign currencies

Rafiqul Islam Azad: The value of Taka has fallen a record decline against the dollar this year, as well as against the world’s major currencies. The rate of these currencies especiallythe European Union Euro, British Pound Sterling, Chinese Yuan, Japanese Yen and the Indian Rupeeis increasing against the Bangladeshi currency.
The inter-bank rate of per dollar against Taka was 109.50, which was Tk95.00 at the same time last year. The rate of per Euro was Tk119.66, which was Tk95.15 last year. The Swiss Franc has gained the most against Taka by 28.25 percent until July this year.
The Swiss Franc is followed by Euro by 25.54 percent while Pound Sterling by 24.4 percent, Saudi Riyal by 15.96 percent, US Dollar by 15.83 percent, Australian Dollar by 13.82 percent, Indian Rupee by 11.86 percent, Yen by 11.59 percent and Yuan by 8.89 percent.
According to bankers about 90 percent of foreign trade is done in US dollars, while the remaining 10 percent is done in other foreign currencies. However, the use of other foreign currencies has increased, it is not much, they said.
The US dollar is considered the most sustainable currency in foreign trade. The value of foreign currencies other than the US dollar changes very quickly against the local currency. Because of this, the US dollar is seen as a trusted and trusted currency, said the bankers.
They further said the US dollar is also considered as a reference for setting various rates.
The foreign trade is also being conducted in other currencies such as Euro, Pound and Yuan, considering the cross currency rate.
According to a government notification, local traders can settle foreign trade using eight foreign currencies – US dollar, Canadian dollar, Australian dollar, Singapore dollar, Euro, British Pound sterling, Swiss Franc and Chinese Yuan.
Sources said the value of Taka has weakened against almost all foreign currencies due to the reduction in supply compared to demand.
The traders are to pay more import bills than export earnings, which is one of the reasons for foreign exchange deficit. We need to find new export markets to increase our foreign exchange earnings.
Talking to Daily Industry, the former lead economist of the World Bank’s Dhaka office, Zahid Hussain, identified a dollar crisis and inflation as factors behind the declining value of the Taka against the dollar and other foreign currencies.
The government fixed the exchange rate and attempted to control imports for the past year. However, these measures could not effectively control the inflation rate, and we did not achieve the expected results. They disrupted the production process,” he observed.
Zahid Hussain further suggested that the government should take necessary measures to increase the supply of foreign currencies to curb the decline in the value of the Taka.
An analyst told media that almost all currencies have depreciated against the US dollar, which has also contributed to the weakening of the Taka against foreign currencies.
He however said that our local currency is weakening sharply due to skyrocketing inflation and low loan interest rates.
Taka cannot strengthen against foreign currencies unless inflation comes down, he added.
According to Bangladesh Bureau of Statistics (BBS) data, inflation in Bangladesh was 9.69 percent in July this year. It was 9.94 percent in May, the highest in 11 years.
A senior official of the central bank said that demand for other foreign currencies continues to increase, however, foreign trade is still dominated by the US dollar.
He also said that the number of tradable foreign currencies has also increased.
In September last year, Bangladesh Bank announced that local banks will be able to maintain accounts in Chinese Yuan with their lenders or branches abroad, so that local businessmen can settle foreign trade transactions using the Chinese currency.
The Bangladesh Bank official said that the government issued a gazette notification in March 2014 and announced the Chinese Yuan as a convertible currency.
Bangladesh and India launched a cross-border trade settlement system in Rupees in July this year.