The Bangladesh Bank has introduced a foreign exchange intervention strategy to support a new exchange rate regime of a crawling peg with a band, aiming for greater flexibility. This strategy seeks to enhance macroeconomic balance, preserve reserve buffers, and improve monetary policy efficiency. Starting January 12, the central bank will announce a daily reference exchange rate for the dollar, which banks will use for transactions. The reference rate will be based on the weighted average of spot foreign exchange transactions. Additionally, banks will report foreign exchange transactions of $100,000 or more twice daily. The central bank will also use foreign exchange auctions to intervene in the market, buying or selling foreign currency depending on exchange rate conditions. These measures aim to modernize monetary and exchange rate policies, ensure smooth functioning of the foreign exchange market, and stabilize the financial system. Non-compliant banks will face penalties and possible suspension from auctions.
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