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Research On Currency Of Bangladesh Essay

4139 words - 17 pages

ASSIGNMENT TWO |
Research on the currency of Bangladesh |
|
GROUP MEMBERS:IFTESHAM ARA JAHAN 082604030FARIHA NOWSHIN HAQUE 1020276030MINHAZUR RAHMAN 081314030MUSA HABIB KISHAN 0930442030NUSRAT MINALLAH SHOSHI 0910283030SIDRATUL MUNTAHA KHAN 0920517530 |

Table of Contents
Analysis of Bangladeshi Taka (BDT) against US Dollar($) 3
Factors that influences BDT 5
Analysis of Macroeconomic variables 7
Income level 7
Fig: Income receipts of Bangladesh from 2005-2012in US dollar 8
Income payments (US dollar) in Bangladesh 8
Effects of inflation on income 9
Effects of interest rates on income level: 11
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However, it was switched to floating exchange rate system in 2003.

We can see that between fiscal year 2008 and 2010, the price of the dollar was steady and constant nearly at around TK 69 a dollar. Between 2008 and 2010, Bangladesh had gone through a remarkable period of rapid inflow of foreign currency measured in US dollars. The main contributor was growth in export earnings and the flow of remittances. Together, these two sources provided much more dollars than were needed for import payments and foreign debt servicing. Foreign Reserves increased from a low of $6.1 billion in June 2008 to $10.7 billion in June 2010. Because of this very favorable supply situation relative to demand, the dollar price did not rise.
The price started rising in 2011, reaching Tk 75 in early July 2011 which was a clear indication that demand for dollar in Bangladesh is growing much more rapidly than supply. The rise in the price of dollar is a market correlation to equilibrate demand and supply.
In early January 2012, BDT depreciated in significant percentage due to lower inflow of foreign currency at around Tk 84.45-TK 84.48 which was the highest ever rise in the exchange rate of the USD against the BDT. But now at the end of November 2012, things have changed for Bangladesh like the BDT has now started becoming stronger because of higher inflow of the foreign currency to the market after the mid July 2012. So the BDT has appreciated by 2.67% which is assuming to increase more in the future against USD over the last couple of weeks, reversing the earlier trend of its depreciation. But this condition will not stay the same for long period of time. Though in present, the US dollar depreciated against money but in the near future because of some factors it is assumed that the US dollar/BDT will rise again and it would maintain the previous trend. So we can say in the country's foreign exchange market are stable and the USD will get stronger as it was in the beginning of year 2012 and the average of exchange rate of the local currency in 2012 has maintained the previous trend. Taka had earlier depreciated by 15.5 per cent in 2011 against the US dollar and over the longer term, the most important policy for preserving the value of the Bangladeshi currency is to keep inflation under control. If the inflation rate in Bangladesh continues to be substantially higher than the US inflation rate, demand for dollar will continue to exceed its supply and the price of the dollar in taka terms will continue to rise over the long term.
Factors that influences BDT
In FY 2008-09 and 2009-10 the exchange rate of taka against dollar remained steady due to sufficient supply of foreign reserve such as USD 10750 million in FY 2009-10 and USD 7471 million in FY 2008-09. But in the recent FY 2010-11 and in current months, the overall increase in commodity and food prices has increased the cost of import, while the flows of remittance have relatively declined. As a result...

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