Bangladesh Bank has taken measures to address the instability in the foreign exchange market caused by the growing demand for the US dollar, according to bank officials. These initiatives aim to stabilize the exchange rate and ensure transparency in the market.

One of the key steps implemented is the setting of a maximum exchange rate for remittance collection. The central bank has capped the rate at 123 BDT per dollar for remittance transactions, ensuring that cross-currency transactions remain within this limit.

To enhance market oversight and transparency, Bangladesh Bank has also launched a data monitoring dashboard. This system is designed to closely monitor market activities and maintain better control over currency fluctuations.

Officials noted that several interconnected factors have contributed to the ongoing volatility in the foreign exchange market. A primary reason is the increased demand for dollars at the end of the fiscal year. December often sees a rise in debt repayments and other financial obligations, putting additional pressure on the foreign currency market.

The situation has been further complicated by the central bank's temporary suspension of dollar sales to meet IMF-set targets. This decision has limited the supply of dollars in the interbank market, widening the gap between demand and supply.

Additionally, Bangladesh's lower credit rating has strained relationships between domestic banks and foreign banking service providers. This has made it more challenging to issue UPAS (Usance Payable at Sight) credit letters, defer payment maturities, and maintain offshore banking loan flows.

The directive to settle foreign debt obligations by December has also exacerbated the situation. This has led to increased pressure on the foreign exchange reserves and liquidity.

Another contributing factor is the role of service providers and intermediaries involved in remittance collection. Their monopolistic practices have disrupted exchange rate stability, contributing to the ongoing volatility.

Moreover, imbalances in dollar inflows and outflows at commercial banks have further complicated the situation, intensifying instability in the dollar market.

Bangladesh Bank's initiatives are aimed at restoring stability in the foreign exchange market and addressing the underlying causes of the current crisis. The central bank's continued efforts are expected to play a crucial role in bringing order to the volatile currency market.