An announcement by the Bangladesh Bank here said the depreciation, which takes effect on Sunday in view of the both Friday and Saturday being weekly holidays here, will push the reference price for the dollar fixed by the country's central bank to 46.95 taka for purchase and 46.95 taka for sale.

With this, the Bangladeshi currency has been devalued on 13 occasions since prime minister Sheikh Hasina's government took office in June 1996.

"The downward adjustment is in pursuant to the continuing policy of maintaining incentives for exports and for inflow from expatriate Bangladeshis, keeping in view the unfolding competitors of Bangladesh," a Bangladesh Bank statement said.

So far this calendar year, the taka has been devalued by 165 paise against the dollar. The rupee-takaexchange rate works to about 1.26 taka to the rupee.

Foreign exchange dealers expressed surprise at what they called a moderate devaluation in view of the fall in currency values against the dollar in neighbouring Pakistan and India following their respective nuclear tests.

"We were rather expecting a higher devaluation given the rate of currency depreciations in other neighbouring nations," a foreign exchange dealer said here.

Both the Indian and Pakistani rupee have declined sharply against the dollar in recent times.

However, the demand for dollars in the country's exchange market was lower on Thursday despite speculation about possible devaluation for the past several days, market sources said.

The devaluations have come in for sharp criticism among national law-makers with the opposition Bangladesh National Party (BNP) stating that these steps could lead to inflation in the economy.

Finance minister Shah Ams Kibria defended devaluation on the grounds that in the past too Bangladesh haddepreciated the currency in line with its trading partners and regional competitors.

Sources at the Bangladesh Bank said the devaluation will encourage remittances from abroad in addition to boosting the exports which, in turn, would help bolster the dwindling foreign exchange reserves of the country.

However, economists predict a return of inflation while also warning that there could be a greater risk of footing higher import bills if the export earnings were not enough to outweigh the higher import costs in taka-terms.