STAR BUSINESS REPORT

The taka edged up against the US dollar yesterday, buoyed by a two-week ceasefire between the United States and Iran that eased pressure on the foreign exchange market.

The weighted average exchange rate stood at Tk 122.75 per dollar, down from Tk 122.84 the previous day, according to Bangladesh Bank (BB) data.

A senior treasury official at a private commercial bank said the market turned volatile in recent weeks as importers rushed to buy dollars amid fears of a prolonged war. That anxiety appears to have subsided following the ceasefire.

When importers scramble for forward buying, rates tend to climb. As tensions cool, demand for forward trading of US dollars is expected to ease, he said.

Forward buying means agreeing today to purchase dollars at a fixed rate on a future date. Forward trading refers to buying or selling dollars now at a pre-agreed rate for delivery later, usually to hedge against exchange rate swings.

In its Bangladesh Bank Quarterly published yesterday, the central bank, however, cautioned that the economy remains exposed to external oil price shocks and currency depreciation.

“A sharp increase in global oil prices, particularly when combined with exchange rate depreciation, could exert significant upward pressure on inflation and lead to a decline in foreign exchange reserves,” it said.

The BB report said that allowing some exchange rate flexibility could help ease pressure on reserves. At the same time, balancing fiscal costs and inflationary pressures may require a partial adjustment to global oil prices.

“Rising geopolitical tensions -- particularly the Iran-Israel-USA conflict -- have already disrupted global energy and food supply chains and may exert additional pressure on both the external balance and domestic inflation. These developments pose near-term risks to price stability, export demand, and import costs,” said the report.

Mirza Elias Uddin Ahmed, managing director of Jamuna Bank, told The Daily Star The The BB has