Central bank says no dollar shortage

Published: April 25, 2009

“There is no shortage of dollars at banks,” Giau said in a government report on Wednesday.

“The continuous rise in the dong/dollar rates on the unofficial market is [due to] speculation and price manipulation,” Giau added.

The dollar eased about VND100 to VND18,160-18,180 on the unofficial market, while it stood at VND17,779- 17,782 on the interbank market on Wednesday following Giau’s comments, dealers said.

The State Bank of Vietnam fixed Wednesday’s reference rate at VND16,936 per dollar, versus 16,939 Tuesday, according to the bank’s website. The currency is allowed to trade up to 5 percent on either side of the official rate.

Nguyen Thi Cuc, deputy general director of Phu Nhuan Jewelry Joint-Stock Company, told Thanh Nien that after the dollar’s surge, the demand for the currency fell on the black market, stopping it from strengthening further.

Nguyen Tuan Anh, forex manager at ANZ Bank, said there was no news from the market that could lift the dollar and the recent rise in the dong/dollar rates was driven by speculation.

The dollar is supposed to increase little this year since consumer prices would not increase much, Anh said.

Inflation rate, which rocketed to 23 percent last year, could drop to just 6 percent this year, Prime Minister Nguyen Tan Dung said on Monday.

“The dollar’s decline can only be sustained if the central bank takes real action to inject more dollars into the banking system,” a private dollar trader in Hanoi said.

The central bank said last month foreign exchange reserves stood at more than US$20 billion, down from about $22 billion in February although the country achieved a rare quarterly trade surplus of $1.65 billion in the January-March period.

Earlier Giau told the media that the State Bank of Vietnam was aware that market participants had rushed to hoard dollars in the past week, lifting it to more than VND18,250, or nearly 8 percent higher than the bank’s regulated rate.

Importers had said they could not buy dollars from banks to pay for contracts. Banks said they had dollars from exporters but since exporters prefer to keep dollars in their accounts, the banks could not lend those out.

The currency fell more than 3 percent against the dollar in the past month on unofficial markets, including gold shops where locals buy and sell the dollar on worries that weak exports and declining foreign investment would weigh on the economy, dealers said.

The central bank would take steps including inspections at dollar exchange agents in the next few days to make them comply with the central bank’s rates to calm the market, Sai Gon Giai Phong newspaper quoted Giau as saying.

The bank would revoke licenses of non-complying agents, he said.

Giau also said businesses that list prices in dollars are violating the Foreign Exchange Code and would be punished according to the law.

He said a number of banks had asked the central bank to instruct exporters to sell foreign currencies earned from their contracts to their banks as part of efforts to raise banks’ foreign exchange funds to meet rising loan demand from importers.

“This is a normal practice but only the Prime Minister has the right to order this rule, not the governor,” VnEconomy quoted Giau as saying.

In May 2003, the government abolished a rule that forced foreign and local firms to sell 30 percent of their foreign currency to banks following commitments with donor countries and foreign investors. Initially, the ratio stood at 80 percent.

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