US dollar price back up on black market

The dong/dollar exchange rate in the last few days in the black market and the rate quoted by commercial banks both have increased rapidly, surprising many people because the official interbank exchange rate has been stable.

The interbank dong/dollar exchange rate announced by the State Bank of Vietnam (SBV) has remained firmly at 18,544 dong per dollar. There has been no sign that SBV intends to adjust the rate. In fact, SBV recently claimed that the dollar supply was profuse and that commercial banks now have dollars to sell.

However, the dong/dollar exchange rate in the black market and the rate quoted by commercial banks have increased by 100 dong over late last week.

US dollar price on the rise

The exchange rate quoted by Vietcombank on June 29 was 19,030-19,080 dong per dollar (purchase and sale prices), increasing by 30 dong per dollar in comparison with Monday June 28 and by 65-70 dong over late last week. As such, just within one week, the dollar price has increased by 0.4 percent in value.

At other banks, exchange rates were also quoted at high levels on the same day. Prices set by some banks increased to 19,100 dong per dollar. Vietinbank’s quoted exchange rates were 19,000-19,050 dong, Eximbank 19,040-19,100 dong, and Sacombank 19,000-19,100 dong.

Meanwhile, on the black market, the dollar price has been increasing continuously from 18,960-18,990 dong per dollar on June 25 to over 19,000 dong.

By the afternoon of June 29, the dollar price on the black market had reached 19,040-19,090 dong per dollar, an increase of 10 dong per dollar over the morning. As such, in the last four days, the dollar has increased by 0.4 percent, while the sale price has increased by 0.5 percent.

Psychological explanation?

The black market has been bustling with many transactions in the last few days. An officer of a foreign exchange shop on Ha Trung street remarked that the dollar price has increased because of higher demand.

Explaining the increases, Pham The Anh, an economist of Thang Long Securities Company, speculated that they originated from people’s worries about the trade deficit in June which was $1.2 billion – a relatively high figure. Prior to that, the announced trade deficit in May was $800 million.

Besides, Anh continued, that with many big enterprises issuing bonds in foreign currencies, the foreign currency demand has been pushed upward. He also confirmed that he cannot see any sign of foreign currency speculation.

Another reason, according to Anh, is that demand for dollars has been increasing from businesses that buy them to pay their matured bank debts. This does not contradict SBV’s claim that the dollar supply is very profuse. Banks report that they can absolutely satisfy demand for dollars from clients.

Meanwhile, a deputy general director of a Hanoi-based bank, pointed out that the dollar price has been increasing because of people’s psychology. The public fear that the dollar price will increase further, so they buy dollars to hoard and to pay bank debts before the loans mature.

Anh from Thang Long Securities Company does not think that the dollar price will increase too sharply and he cannot see any worrisome problems from the dollar price increases.

Tags: US dollars, Vietnam finance, Vietnam financial