What is an exchange rate?
An exchange rate is the price of one currency in another. “The dollar is at Tk 120” means it takes Tk 120 to buy one US dollar. Like potatoes and onions, the dollar has a price, and that price goes up and down.
If the dollar goes from Tk 110 to Tk 120, the taka has “depreciated” or weakened: you now need more taka for the same dollar. The reverse means the taka has strengthened. Note that the dollar getting dearer and the taka getting cheaper are two sides of the same event.
Say Rina’s brother sends 200 dollars a month from Dubai. At Tk 110 a dollar the family gets Tk 22,000; at Tk 120 the same 200 dollars bring Tk 24,000. Good news for the family. But at the same time, imported cooking oil, powdered milk and medicine ingredients get dearer, because they are bought in dollars. The numbers are only an example.
Why it matters to an investor
- An effect on inflation: a weaker taka makes imported goods, fuel and raw materials dearer, which later shows up in shop prices, and so in the real return on your savings.
- An effect on foreign-currency goals: costs paid in dollars, such as a child’s study abroad, treatment overseas or Hajj, can rise sharply in taka terms.
- An effect on company profits: exporters earn more taka when the taka weakens, while import-heavy companies or those with dollar loans see costs rise. On the stock market, the effect differs by sector.
- An effect on interest rates: to ease pressure on the taka, the central bank sometimes raises interest rates, which spreads to deposits, bonds and shares.
How the taka’s price is set
At heart it is demand and supply. Dollars come into the country from export earnings, migrant workers’ remittances, foreign investment and foreign loans. Dollars are needed to pay for imports, repay foreign loans, and for study, treatment and travel abroad. When demand for dollars outruns supply, there is pressure for the dollar’s price to rise.
Countries decide how much of this price to leave to the market. Some keep the rate fixed, some let the market set it fully (floating), and many take a middle path, where the central bank manages the rate by buying and selling dollars from its reserves (managed). Bangladesh Bank introduced a “crawling peg” in May 2024, with banks trading dollars around a mid-rate (Tk 117 at the time). In May 2025 Bangladesh Bank announced a move to a market-based exchange rate system. These arrangements can change over time.
The taka-dollar journey in Bangladesh
According to the World Bank, the annual average rate was roughly between Tk 78 and Tk 85 from 2014 to 2021, so it moved quite slowly. Then it rose fast: about Tk 91.7 in 2022, about Tk 106.3 in 2023, about Tk 115.6 in 2024 and about Tk 121.9 in 2025. In four years, the same dollar came to cost about 43% more taka.
- These are averages; the rate varies from day to day and between banks and the kerb market. Bangladesh Bank publishes the latest rate daily.
What moves the taka
- Higher exports and remittances: more dollars come in, easing pressure on the taka.
- Higher import bills: for example when world oil or food prices rise, demand for dollars goes up.
- Differences in inflation: if prices at home rise faster than abroad, the currency usually weakens over long periods.
- Interest rates and confidence: higher rates at home and confidence in the economy attract foreign money; when confidence falls, the reverse happens.
Worked example
- Say a year’s tuition fee is 10,000 dollars, and the fee in dollars has not changed.
- At Tk 85 to the dollar (close to the 2021 average), the cost is Tk 8,50,000.
- At Tk 122 (close to the 2025 average), the cost is Tk 12,20,000. The difference is Tk 3,70,000.
Result: without the fee rising at all in dollars, the cost in taka rose by about 43.5%. When planning any future cost paid in dollars, it is important to allow for the exchange rate moving. The fee figure is only an example.
Common mistakes
- Assuming the dollar rate will stay where it is today for the next few years.
- Seeing a weaker taka as purely bad or purely good. Exporters and remittance-receiving families gain; importers and shoppers pay more.
- Making big decisions from a day or two of kerb-market rates. Short-term swings are often not the long-term trend.
- Buying or hoarding dollars through unauthorised channels in the hope of a rise. There are rules on holding foreign currency, and both legal and financial risks.
The exchange rate is the price of the dollar, moved by demand and supply; any future cost paid in dollars can grow in taka terms, so leave room in your plans for the rate to move.