Bangladesh Bank has introduced Crawling Peg Exchange Rate System to make the exchange rate more flexible.
Foreign Exchange Policy Department (FEPD) of the central bank issued a circular in this regard signed by its director Md Sarwar Hossain on Wednesday.
According to the circular, it has been decided to introduce a Crawling Peg Exchange Rate System for spot purchases and sale of US dollar.
Under this system, a Crawling Peg Mid Rate (CPMR), has been set at Tk 117.00 per dollar with immediate effect.
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Scheduled banks may purchase and sell US dollars freely around the CPMR with the customers and in interbank deals.
Earlier, on Sunday (May 5), Bangladesh Bank (BB) Governor Abdur Rouf Talukder said within a very short time the central bank will go for a market-based interest rate and apply a crawling peg system to fix the foreign exchange rate.
He said the BB is working with prominent economists and bankers to prepare a contractionary monetary policy measure for curbing inflation and restoring macroeconomic stability.
The crawling peg is a system of exchange rate adjustments in which a currency with a fixed exchange rate is allowed to fluctuate within a band of rates. The method fully uses the key attributes of the fixed exchange regime, as well as the flexibility of the floating exchange rate regime.
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Currently, the central bank is selling dollars to commercial banks at Tk110 per dollar.