BANGLADESH FOREIGN EXCHANGE MARKETForeign Exchange MarketThe foreign exchange market allows the exchange of currencies to facilitate international trade and financial transactions. Market developments in Bangladesh are closely linked to the country's foreign exchange regime. Until 1993, there was virtually no foreign exchange market. BANGLADESH BANK, as an agent of the government, was the sole supplier of foreign exchange to users. It attempted to balance the supply and demand of currencies at an officially determined exchange rate, which, however, ceased to exist with the introduction of current account convertibility. Immediately after liberation, Bangladesh's currency, the taka, was pegged to the pound sterling, but was brought down to par with the Indian rupee. Within a short time, the value of the taka saw a rapid decline against foreign currencies and by May 1975, it was significantly devalued. In 1976, Bangladesh adopted a managed float regime, which continued until August 1979, when a currency-weighted exchange rate method was introduced. The exchange rate management policy was again replaced in 1983 by the trade-weighted basket method and the US dollar was chosen as the intervention currency. At that time, a secondary foreign exchange market (SEM) could develop alongside the official exchange rate. This gave rise to a restricted market. Until 1990, multiple exchange rates were permitted under different names of export benefit programs such as Export Bonus Program, XPL, XPB, EFAS, IECS and home money transfer program. This led to a wide divergence between the official rate and the SEM rate. The situation has also gradually given rise to a number of conflicting regulations, poor risk management and various types of implicit or explicit government guarantees to currency users. This led to a number of macroeconomic imbalances, prompting the government to adjust the official rate in stages and liquidate its difference with the SEM rate. The two rates were finally unified in January 1992. The first step towards currency convertibility was taken on July 17, 1993, marking the beginning of a relatively open foreign exchange market in the country. Until then, the Bangladesh Bank declared the average rate as well as the dollar buying and selling rates applicable to authorized dealers. Initially, the gap was Tk 0.10, which was gradually widened up to Tk 0.30. The players in the Bangladesh foreign exchange market are the Bangladesh Bank, authorized dealers and customers. The Bangladesh Bank is empowered by the Foreign Exchange Regulation Act, 1947 to regulate the foreign exchange regime..