Bangladesh鈥檚 interbank foreign exchange market experienced a sharp rise in transaction volumes in June, driven primarily by intensified spot market activity and sustained swap transactions.
According to Bangladesh Bank鈥檚 monthly report titled Exchange Rate and Foreign Exchange Market Dynamics 鈥� June 2025, daily average spot transactions soared to $68.7 million, up from just $7.5 million in March and April.
The increased activity signals a notable shift toward market-based exchange rate operations and reduced central bank intervention, bankers said.
They said that the increased vibrancy in spot trading reflects growing confidence among market participants and improved operational flexibility under the new exchange rate framework.
Spot market transactions 鈥� where foreign currencies are traded for immediate delivery 鈥� saw their share rise to 37.7 per cent of total interbank activity in June, up from 13.2 per cent in April and 16.5 per cent in May, according to the BB report.
The spike followed Bangladesh Bank鈥檚 decision to phase out direct interventions and allow market participants to quote rates freely after mid-May, it said.
The move not only increased exchange rate flexibility but also encouraged banks to engage more actively in real-time currency trading based on market signals.
Spot transactions peaked just before a 10-day Eid holiday, reaching $155.03 million on June 2 and $184.30 million on June 4, suggesting that demand for foreign exchange spiked as banks adjusted their positions ahead of the break, according to the report.
While the spotlight in June was on the spot market,聽 swap transactions 鈥� where two counterparties exchange currencies with an agreement to reverse the transaction at a future date 鈥� continued to dominate in terms of absolute volume.
Average daily swap transactions stood at $113.5 million in June. However, their share declined significantly to 62.3 per cent, compared with 86.8 percent in April and 83.5 per cent in May.
This relative drop does not imply reduced importance of swaps, but rather reflects the rapid rise in spot activity, as the market began operating more independently, bankers said.
The expansion of spot transactions alongside persistent swap operations illustrates a more dynamic and self-sustaining foreign exchange market.
Spot deals are particularly crucial in reflecting current market sentiment, while swaps are typically used by banks to manage short-term liquidity needs and balance mismatches in foreign currency positions.
The spot reference exchange rate (RR)鈥攁 weighted average of freely quoted market transactions鈥攁lso began to reflect more realistic pricing.
Bangladesh Bank started publishing RR rates twice daily since January 12, 2025, based on transactions before 11:00 am and 5:00 pm, respectively.
These reference rates generally moved in line with the interbank exchange rate.