Bangladesh Bank (BB) sold $11.5 million from its reserves through an open auction on Monday, testing whether banks were facing any real dollar shortage and what exchange rate the market was willing to pay.
Six commercial banks bought the dollars in the auction. The central bank had offered $20 million to the market, but banks bid for only $11.5 million. All bids were accepted, leaving $8.5 million of the offer untaken.
The result, according to BB officials, indicated that there was no significant hidden pressure for dollars in the banking system despite claims in some quarters of an impending shortage and further depreciation of the taka.
BB released details of the auction on Tuesday. Banks bought dollars at rates ranging from Tk122.80 to Tk123.35, with the weighted average rate at Tk123.22. The cut-off rate was Tk122.80.
The central bank normally sells dollars to commercial banks on a case-by-case basis when demand emerges. Monday’s open auction was used instead to gauge both the depth of demand and the market-clearing exchange rate.
“There has been no decision yet on whether dollar sales will shift to the auction method,” BB spokesperson and Executive Director Arief Hossain Khan said. “The central bank will assess market conditions and decide how to proceed when the next sale is required.”
He said the auction also allowed the central bank to see whether there was genuinely excess demand for dollars and what banks themselves considered an appropriate exchange rate.
“Through the auction, banks themselves submitted the rates at which they were willing to buy,” Khan said.
A senior official of the relevant central bank department said the auction was called partly to test market claims that banks were facing a dollar shortage and that the exchange rate was set to rise further.
