Written by The Banking Post
The Bangladeshi taka has remained undervalued for two consecutive months, reflecting a shift from the sharp depreciation pressures of 2023, according to a new Bangladesh Bank (BB) study.
The report shows that the equilibrium exchange rate, measured by the Real Effective Exchange Rate (REER), stood at Tk 121.55 in June 2025, leaving the taka undervalued by Tk 1.71 against the US dollar.
In previous years, the currency was largely overvalued — by Tk 9.09 in June 2021, Tk 8.11 in 2022, and Tk 0.22 in 2023. By mid-2024, it shifted to a slight undervaluation of Tk 1.11. Analysts said the recent correction was driven by currency depreciation and easing relative prices.
The study warned that misaligned exchange rates can strain foreign reserves and fuel instability. However, it noted that depreciation pressures have eased since late 2024, when the central bank rolled out measures to stabilise the external sector.
“These measures have begun to deliver encouraging results: the exchange rate is exhibiting signs of stabilisation, and foreign reserves are showing early signs of recovery,” the report said.
The introduction of a fully market-based exchange rate system in May 2025 also helped curb volatility, with the taka showing greater alignment with its equilibrium level by the end of June.
BB researchers emphasised that understanding equilibrium exchange rates is vital for ensuring external sector sustainability, competitiveness, and macroeconomic stability. The study used internationally recognised REER and BEER indices to track misalignment, offering policymakers a benchmark for monitoring currency stability.
