US dollar purchase becomes difficult

Some banks have announced that selling of US dollars has been suspended to customers buying by retail and extra costs have been added for business buyers. What is happening to the US dollar?
Xuan, living in Tan Binh district, had come to bank to purchase US dollar for travelling. She was told by the staff that there is currently no supply of US dollars so the selling activities have been suspended.
In a leading joint stock bank, the staff said that their leader has issued written notice to suspend US dollar selling; other foreign currencies are still available for buying.
Even Vietcombank has also answered Xuan that they have temporary ceased US dollar selling, since the supply is in shortage. Xuan had to buy in black market at 19,260 dong per US dollar, 160 dong higher than price listed in banks.
Prices have risen up
General director of a bank revealed that he could only manage to purchase a certain amount of US dollars to sell to familiar businesses; others who want to purchase US dollars have to queue up.
Businesses said the situation has happened again, when banks have added extra costs of about one percent while selling US dollars to business customers, thus pushing the actual selling price of US dollar to around 19,290 dong per US dollar threshold.
A few months ago, black market price was close to banks’ price. However, for over a month, price in free market has tended to exceed the ceiling price. Although the current US dollar trading price in the market has slightly fallen, compared to a few days before, it is still at high levels of 19,210 dong and 19,260 dong per US dollar (buying and selling). In some places, the selling price has been pushed up to 19,270 dong per US dollar.
While banking system has accepted buying US dollars at high price for about two or three weeks, when the difference between buying and selling price was gradually narrowed, and the two prices were almost equal at about 19,098 to 19,100 dong per US dollar, even in the leading bank for export payment as Vietcombank. The exchange rate in this bank has reached the regulated ceiling price, and stood still for two to three weeks. It is no longer flexible as before.
There is actually no foreign currency shortage
The State Bank has proved to be successful in managing foreign exchange market in the last five months, since the extension of foreign currency exchange rate. The exchange rates in the market have stood still and been hundreds of dong far from the ceiling price. After offsetting the current deficit, the surplus of capital balance account to June was nearly $3.5 billion, according to State Bank. In early July, the State Bank affirmed that the foreign currency liquidity remains safe, and is in capable of fulfilling all coming-to-due obligations and satisfy most of the demand for foreign currencies of the economy.
Thus, the problem may not be the shortage of US dollars. Banks still have US dollars to sell and offer loans to businesses, but the price is now higher. Businesses that accept the high selling price of banks would be satisfied.
In early of the week, ACB Securities Company said that the greatest concern of the foreign exchange sector is the exchange rate fluctuation. US dollar/dong forward rate at 12-month term has gone up to 21,357, up by over 500 dong compared to the end of June. If this situation continues, the withdrawal of foreign capital possibly would happen, since the investing profits may not offset the exchange rate risk.

The current price has hit the ceiling price, but capital owners are still not willing to sell, since they hope the price would increase further, despite evaluation of the State Bank that further increase is not reasonable.

For orientations in the last six months of the year, the State Bank confirmed that exchange rates and foreign exchange market would be stabilised, and consistent with other macro balances.

Talking to the press, Governor Nguyen Van Giau said the macro indicators are in good trend to stabilise exchange rates.
However, some other problems still have impacts on exchange rates, and the gold market is always related to foreign currency market. Since the State Bank has not handled well, there have been negative impacts.

For example, whenever there is a gathering of US dollars for gold import, US dollar price on the black market would thus rise, leading to psychological impact to the objects that have US dollars available. They would wait for further increase in price, making the supply to go down.

Tags: US dollar, Vietnam finance, Vietnam financial, Vietnam Money market

Posted by VBN on Aug 6 2010. Filed under Banking-Finance. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry