The taka-dollar exchange rate in the interbank market depreciated from around Tk 60.5 per US dollar in December 2004 to around Tk 63.5 in March 2005, representing depreciation of about 5.5 percent during January-March, 2005, according to a Bangladesh Bank (BB) quarterly publication released yesterday.

After a long period of relative exchange rate stability, foreign exchange market experienced a severe pressure since early January 2005 leading to a sharp depreciation of exchange rate during January and February 2005. The depreciation mainly reflects much higher growth in import payments than the growth of export receipts and workers' remittance receipts in the preceding months, it said.

"There has been substantial volatility in both the rates and volume of transaction. To reduce the pressure in the foreign exchange market, BB sold around US$148 million in February 2005," the quarterly said.

As a consequence of that and partly due to improvement in foreign exchange inflows and monetary tightening, exchange rate stabilised somewhat since mid-March 2005, the central bank added.

After a notable decrease in the second quarter, the 12-month inflation showed an upward trend during the third quarter of Fy05. It resulted mainly from increase in food prices and to a lesser extent in non-food prices partly due to rise in the cost of imports induced by depreciation of taka, it said.

Overall 12-month point-to-point inflation increased from 5.5 percent in December 2004 to 6.7 percent in March 2005 propelled mainly by increase in food prices, it explained.

Following a decrease in 12-month point-to-point food price-inflation from 9.5 percent in September 2004 to 6.7 percent in December 2004, the index increased to 8.2 percent in March 2005, reflecting mainly rise in the cost of imported food due to substantial depreciation of taka against all major currencies and poor harvest of aman crop, BB said.

Looking at the regional developments, after a trend towards moderation during October-December 2004, inflationary situation in South Asian countries seems to have showed a rising trend during the January-March 2005 reflecting rise in commodity prices in the international market combined with demand pressure in the domestic market, it added.