The taka weakens against the dollar: Fitch
The taka, the Bangladeshi currency, will face more depreciating pressure against the US dollar, mainly due to imported inflation, according to a report released by Fitch Solutions.
He predicted that the exchange rate would be Tk 85 per dollar this year and Tk 86.50 next year.
The local currency will settle at 87 Tk in 2023.
Fitch Solutions and Country Risk and Industry Research released the forecast on November 17.
He had previously predicted that the trade would be Tk 84.75 per dollar this year and Tk 85 next year.
Data from the Bangladesh Bank showed that the interbank exchange rate was 85.80 Tk compared to 84.80 Tk a year ago.
Since Fitch Solutions’ last update in August, the taka has depreciated 1.1% against the dollar, bringing the average exchange rate for the year to 84.93 Tk to the dollar, a t -he indicates.
High global inflation and the more hawkish positions of the world’s major central banks have led to weak emerging market currencies and a strong US dollar, he said.
“However, we also believe that the Bangladesh Bank will continue to intervene to ensure that Bangladesh maintains its export competitiveness, without fueling import inflation,” he added.
The BB continued to increase its foreign exchange reserves, which stood at $ 46.45 billion in October, up 13.3% year-on-year, he said.
“The build-up of reserves has helped offset the appreciation pressures of the taka, but we note that since the end of August, reserves have fallen 3.3%, despite the depreciation of the taka,” he said.
This likely reflects the BB’s efforts to manage the depreciation of the taka and Fitch Solutions expects further intervention to offset exchange rate volatility and the potential strength of the US dollar over the coming months.
The Fitch believes the BB would seek to contain the depreciation of the taka to curb import prices and the resulting inflationary pressures.
Inflation rose 5.6% year-on-year in June from 5% in January this year.
Spikes in commodity prices and supply chain disruptions have pushed up import prices. In particular, rising energy costs will put upward pressure on price growth, Fitch Solutions said.