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Forex Swaps Decline as Central Bank Pushes Spot Trades

BB’s dollar buying shrinks swap volume, but swaps still dominate market

Written by The Banking Post


Foreign-exchange swap transactions on the interbank market fell in August as Bangladesh Bank (BB) pressed ahead with its strategy to shift trading toward spot deals for greater transparency.

Central bank data show that average daily swap volume dropped to $77.04 million in August, down from $86.94 million in July. Still, swaps continued to account for nearly 70 per cent of interbank forex activity during the month.

Bankers said the decline was largely driven by the central bank itself, which directly purchased US dollars from the market. “As Bangladesh Bank has been buying dollars, the volume of swaps has fallen,” said a treasury head at a leading commercial bank.

Spot transactions also slipped slightly as exchange-rate volatility eased, though daily deals fluctuated widely between $2.0 million and $75.5 million. Euro-Taka trades were negligible, with just $2.88 million changing hands over four days.

A senior central bank official defended the strategy, saying spot trades better reflect real supply and demand. “This is a market-based system, while swaps do not provide the true picture,” the official noted, adding that BB now uses spot rates as the benchmark for setting the daily exchange rate.

Under the previous governor, swaps were widely promoted to address severe dollar shortages following the Ukraine war in 2022. That policy has now shifted, with BB prioritising spot transactions to deepen liquidity and improve transparency.


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