Dollars still in short supply

Almost a week after the State Bank of Vietnam raised the official dong/dollar exchange rate and narrowed the trading band, the foreign currency market has begun cooling down. Businesses holding large amounts of dollars remain averse to selling them to banks, reports Nguoi Lao Dong.

On November 30, the interbank exchange rate had eased by five dong per dollar to 17,956 dong.  Commercial banks were selling the dollar to customers at 18,495 dong per dollar, the maximum allowed by the State Bank, and buying it for 50-100 dong per dollar less.

For the first time in many years, the day also witnessed commercial banks quoting slightly different dollar prices.  Some bankers said that they have to offer a higher purchase price to compete with other banks.

The focus of the Government’s new foreign currency policy is to encourage businesses that earn dollars by exporting to sell these dollars to banks. However, the dollar supply has not increased, reportedly because most dollar holdings are in fixed term deposits and businesses will only agree to sell the dollars when the deposits become mature. Therefore, banks have to offer high purchase prices to encourage businesses to release their hoards.

Meanwhile, importers said that they have not been able to purchase dollars from banks though they have been waiting two days.

On the black market, the dollar price has decreased by 100 dong per dollar to around 19,450-19,500 dong per dollar.

Some big non-bank foreign currency dealers in Hanoi said that there are more sellers than buyers these days. No one has placed an order to purchase large amounts of dollars and the highest amount from a single client has been only $20,000.

The owner of a gold shop in HCM City said that the black market is quiet these days because businesses hesitate to seek to purchase dollars there following the State Bank’s intervention.  He said that if importers are able to purchase dollars from banks soon, the dollar price on the black market will decrease sharply.

Dr Tran Hoang Ngan, Vice President, HCM City Economics University The State Bank of Vietnam ought to push up the purchase of foreign currencies by collecting all the foreign currencies that businesses are now keeping in bank accounts and then distribute these to the banks with short foreign currency positions. It should also set up a regulation that the State Bank has the right to collect foreign currencies if, after a certain time, exporting companies do not sell these currencies to banks in exchange for dong. Cao Sy Kiem, National Advisory Council for Monetary Policies The Prime Minister has instructed economic groups and general corporations to sell dollars in order to improve the dollar supply. However, businesses so far have sold only a small volume, and are hold on to keeping several billion dollars. I favor more comprehensive measures. We should apply a pricing scheme which ensures that businesses don’t take losses if they release dollars, and apply simple procedures. More importantly, we need to guarantee that they can buy dollars when they need dollars to finance imports.

VietNamNet/NLD

Tags: Vietnam currency market