Inherent difficulties in millimeter-wave radio operations, such as higher atmospheric attenuation, especially during rainy times, motivated the use of mesh architecture in millimeter-wave band for broadband fixed wireless access (BFWA) networks. When used with highly directional antennas, these mesh networks also provide better frequency reuse. In a recent proposed architecture for such networks, a link can have multiple radio channels. However, to provide traffic engineering with scalability, it is needed to develop a distributed dynamic channel allocation algorithm to allocate channels to these links. This paper proposes a distributed dynamic channel allocation algorithm that is scalable and able to provide traffic engineering if invoked periodically. The proposed solution provides traffic engineering by optimizing link capacities by adding or removing channels from a link while maintaining interference constraints, based on current network conditions. Simulation results suggested that proposed algorithm performs better than a solution based on fixed channel allocation.