US Dollar to Bangladeshi Taka Cash Market (Kerb) Exchange Rate

Kerb Market Analysis

This dashboard below presents the current USD to BDT exchange rate in the cash market (kerb) of Bangladesh.

Latest Day of Data 07 Feb, 2026
Buy Rate BDT 126.82
Sell Rate BDT 125.31
USD to BDT Kerb Market Rate

Why Does It Deviate?

Why does the kerb market rate deviate from the official rate? There are numerous reasons for this:

  1. The "Incentive Gap" in Inward Remittances: While Bangladesh Bank offers a 2.5% cash incentive to encourage expatriates to send money through official banking channels, the effective rate often lags behind the "street rate." If the spread between the formal buying rate (plus incentive) and the informal rate offered by agents abroad exceeds that 2.5% margin, migrant workers naturally gravitate toward the higher return. This diverts foreign currency away from the central reserves and into the kerb market, keeping the supply there fluid but the price consistently higher than the bank rate.
  2. Also, when BB declares a certain percentage as incentive, the cash market reflects this immediately, so, for example, if the USD to BDT rate is 100 and incentive rate is declared as 2.5%, the effective rate becomes 102.5. This creates a temporary divergence between the official rate and the kerb rate. However, the kerb rate will soon adjust to the official rate, and the divergence will be eliminated as demand for cash dollar is pretty inelastic. Why is it inelastic?
  3. Rigid Banking Regulations vs. Dealer Agility: Official exchange houses and banks are bound by "Crawling Peg", "Verbal Instructions" or any other central bank caps that the central bank puts in place, which prevent them from reacting instantly to supply shocks. In contrast, local market dealers in hubs like Motijheel and Dilkusha operate on pure supply and demand. When banks "ration" dollars due to shortages, these dealers charge a "scarcity premium" for immediate cash settlement. They absorb the volatility that banks are regulated to ignore, resulting in a divergence where the kerb rate reflects the immediate reality of the street rather than the policy target.
  4. Unmet Demand from "Floating" Participants: This is one of the key reasons behind the inelastic nature of the demand for dollars. A significant portion of demand comes from participants who find the banking process too cumbersome or restrictive, such as small-scale "luggage" importers, medical tourists, and students requiring funds above their travel quotas. Since banks require rigorous documentation (LCs, passport endorsements) that these groups often cannot provide quickly, they turn to the open market. This inelastic demand—where participants are willing to pay any price to secure funds for travel or goods—creates a permanent price floor in the kerb market that sits above the official rate. So, even if dollar supply is high, the kerb rate would remain higher, creating a permanent divergence between the two.
  5. The "Reverse Hundi" by Resident Foreigners: A massive, often overlooked driver of kerb market demand comes from foreign nationals (specifically from neighboring countries like India and Sri Lanka) working in Bangladesh's garment, textile, and IT sectors. Many work on tourist visas or lack full work permits, making it impossible for them to repatriate their salaries through official banking channels. Consequently, they buy dollars or use Hundi agents to send their earnings home. This creates a steady, silent drain on the street-level dollar supply that official data never captures.
  6. Capital Flight and the "Second Home" Syndrome: A massive driver of the rate deviation is the inelastic demand from wealth accumulators, both domestic and abroad. Externally, wealthy Bangladeshis in hubs like Dubai and Singapore act as "Aggregators," hoarding foreign income to fund "Second Home" schemes or purchase properties in Begum Para, rather than remitting it. Internally, individuals possessing undocumented wealth drive the kerb market because they are barred from the formal banking system for such transfers. Since they cannot simply ask a bank to move illicit funds, they are forced to pay whatever premium the black market demands, creating a high price floor that official rates can never match.

While the kerb market reflects the immediate demand driven by capital flight, it offers only a fragmented view of the currency's valuation. To understand whether the official exchange rate is genuinely misaligned with economic fundamentals beyond just illicit flows, we must look at a broader trade-weighted metric. This necessitates an analysis of the currency's external competitiveness relative to inflation and trading partners, which is best measured by the REER.

Real Effective Exchange Rate (REER)

The Real Effective Exchange Rate (REER) is the weighted average of a country's currency in relation to a basket of other major currencies, adjusted for the effects of inflation. It serves as a measure of a country's international competitiveness.

REER Formula: REER_t = Product of relative exchange rates and price indices
15 Year REER Index of Some Comparable Countries
(100 = Fair Value, >100 = Overvalued, <100 = Undervalued)

I have added the REER data of different comparable economies to show the REER of the Bangladeshi Taka in relation to them.

Why does the REER number not match up with the official REER data provided by the Bangladesh Bank?

REER is a relative metric, sensitive to the chosen trade partners and the initial calculation starting point. The Bangladesh Bank's official REER differs from this REER data due to their distinct selection of trade partners and starting point. My approach prioritizes a consistent methodology and starting point across countries, which is essential for comparative analysis, rather than matching the Bangladesh Bank's specific REER figure.

To gain insights from REER, it is also extremely important to see YoY and MoM changes rather than just focusing on the absolute value. As a currency may behave completely differently from another currency due to the distinct trade pattern of that currency.

Data Source

I don't own any of the data that's presented in this article. Rather, I am just presenting it in a nicer form for your viewing. The owner of the data is Breugel's Senior Fellow Zsolt Darvas. Breugel has shared their datasets under CC BY-ND 4.0 license. You can find their datasets in this link.