The paper attempts to assess Bangladesh’s experience under the new regime of ‘generalised floating’. In doing so, it focuses mainly on its potential for being yet another source of instability for the economy. The paper endeavours to establish four things. First, through the computation of instability-indices, it highlights the extent of variability experienced in Taka’s bilateral exchange-rates and effective exchange-rate. Second, it appraises the qualitative and quantitative impact of this variability on important micro-economic decisions and macro-economic variables. Third it attempts to decompose instability in Taka’s effective exchange rate, into a totally external component and one ascribable to exchange-rate policy of the authorities. It is shown that the latter was successful in reducing average instability in the period of 1976-81 even if variability of bilateral exchange-rate remained high in absolute terms. Fourth, it speculates on potential policy-options and argues that under present conditions, a Taka-dollar-peg has to be the recommended policy.