Written by The Banking Post
A softer taka is beginning to restore Bangladesh’s global trade competitiveness, as the currency edges closer to its equilibrium level against the US dollar.
Latest data from Bangladesh Bank show the real effective exchange rate (REER) index fell to 101.43 in February 2026 from 102.02 a month earlier—signalling improved price competitiveness after a prolonged period of overvaluation.
A REER reading of 100 is considered the benchmark for equilibrium. Based on the latest index, the implied exchange rate suggests the dollar should have traded at Tk124.05 in February. In reality, it hovered around Tk122.30, leaving the taka slightly stronger than its equilibrium level.
A higher REER typically reflects an overvalued currency, making exports more expensive. The recent decline, therefore, indicates that Bangladeshi goods are becoming more competitive in global markets.
Central bank officials attributed the shift to favourable inflation differentials with key trading partners, along with methodological updates in the REER calculation. “As remittance inflows increase, they have a measurable impact on the REER,” said a senior official.
Rising inflation in major partner economies such as China and India has also helped narrow the gap, easing pressure on the taka.
Economists say earlier overvaluation was driven by persistently higher domestic inflation. “Higher inflation compared to trading partners had been a key factor behind the taka’s overvaluation,” said an economist.
The adjustment follows the central bank’s move to a more market-based exchange rate regime in May 2025, aimed at allowing greater flexibility in currency pricing and improving external balance.
