Further Weakness Ahead

In line with our long-term view, the taka has weakened over the recent months. Indeed, it has depreciated much more rapidly than we initially expected, surpassing our previous end-2011 target of BDT72.00/US$. Since the start of the year, the taka has weakened by 3.4% to BDT73.15/US$, making a break through its all time high of BDT72.98/US$ set in November 2006. The underlying fundamental depreciatory pressures (a continuing balance of payments deficit) signals further weakness ahead. As such, we are now pencilling in end-year targets of BDT74.50/US$ and BDT76.50/US$ for 2011 and 2012 respectively.

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