For the last three years all the major currencies have been depreicated, more or less, against the USD (plz see the attached Figure).
Interestingly, Indian Rupee depreciated 13.08% in last five years (from 6 October 2011 to 6 October 2016), 3.38% in last three years (6 October 2013 to 6 October 2016).
Similarly, Pakistani Rupee, depreciated 7.85% in last five years (from 6 October 2011 to 6 October 2016) but appreciated 0.69% in last three years (6 October 2013 to 6 October 2016).
At the same time, Euro, Japanese Yen, Malaysian Ringgit, and Chinese Yuan have depreciated respectively (7.92%, 13.20%, 11.51% , and 1.89%) in the last five years.
So what's our thought on this?
- There is no "should". A currency in today's world should float to the right level with minimum government or central bank interference. But then I'm a believer in the market economym-- even when the Pound falls so much.
I'm in agreement with Professor Damary. Government interventions do not have a good track record, primarily because, no matter how well intentioned, the policy makers cannot know what the market's reaction will be, making the entire exercise inadvisable, in my view.
The countries' balance of payment need to be carefully investigate as the depreciation of currency usually will benefit the exporters at large. The devalued currencies will cause more harms to the consumers especially the Bangladeshi workers who's earning is within the boundaries of minimum wage where most of its wage earners are earning the minimum wage of USD19 per month or 1500 taka. The country should exploit the advantages of cheap oil price and raw materials for its textile industry. By producing cheap, selling cheap while capturing more market share. This could be a sustainable options for bangladesh economy.
Dear Prof. Akhter Uddin,
I have a gut reaction to this and that is if the Bangladesh Government finds it too difficult to appreciate their currency they should depreciate or peg their currency to a basket of currencies. That will keep the Government as an important player in the International Financial and other markets and provide a good reason for providing financial subsidies like fuel or credit subsidies which a developing country cannot avoid to do.
S.K.Mallick
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