The Bangladesh Bank has taken a significant step by deciding to establish the rate for future delivery of foreign exchange, particularly the US dollar, commonly referred to as a forward contract.
This move has generated mixed reactions within the business community.
The forward exchange rate is the rate at which a bank commits to exchange one currency for another at a predetermined date when entering into a forward contract with an investor. This decision by the central bank has been made against the backdrop of a foreign exchange crisis, during which banks have been applying varying rates for forward purchases of dollars.
In a notice issued recently, the central bank stipulated that the forward premium would not exceed SMART (Six-Month Average Rate of Treasury bill) plus 5 percent per annum, based on declared spot rates for forward transactions with customers.
The SMART, a new system introduced by the central bank for determining lending rates, stood at 7.14 per cent in September.
Currently, the USD is trading at Taka 110.50. Consequently, customers who engage in forward purchases of US dollars will be required to pay Taka 123.91 per dollar at a future date.
Before this rate was established, banks were applying disparate rates for forward sales of US dollars, resulting in fluctuations in the foreign exchange market, according to a senior official at the central bank.
