Bangladesh allowed dealers to add a premium on non-deliverable forward contracts for the first time, as the central bank stepped up efforts to loosen its control on the currency.
(Bloomberg) — Bangladesh allowed dealers to add a premium on non-deliverable forward contracts for the first time, as the central bank stepped up efforts to loosen its control on the currency.
The forward premium will not exceed the six-month moving average rate of treasury bills, known as SMART, plus 5 percentage points per year, according to a central bank notice dated Sept. 24.
The decision is expected to “maintain orderly discipline in the foreign-exchange market,” Bangladesh Bank said.
Bangladesh Bank pledged in June to shift to a market-driven exchange rate and while the currency’s spot rate is still capped, the limit has been gradually eased in recent months. Non-deliverable forward contracts allow investors to take a view on the exchange rate and settle the difference between the agreed rate and the actual price in dollars.
The dollar rate for 12-month forward contracts for importers will rise to 123.91 taka from 110.50 taka as the moving average rate of treasury bills is at 7.14%, Syed Mahbubur Rahman, managing director of Dhaka-based Mutual Trust Bank, said in a phone interview.
–With assistance from David Finnerty.
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