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Surging dollar sets off black market flurry
Forex beset by speculative fever
People crowded jewellery shops and other foreign currency exchange agents yesterday to trade in US dollars, as the dollar rose to a new record high of VND17,750 on the open market from VND17,200 earlier in the morning.
The market exchange rate has far-outstripped the official exchange rate. At Vietcombank yesterday, the USD/VND buy/sell rates remained 16,215/16,221, while the interbank rate stood at 16,060.
"It's the 'hottest and busiest' day of the year here, literally," said Nguyen Huu Dang, deputy head of business board at the Ha Noi-based Bao Tin Minh Chau Co.
"Traders are circling. They bought dollars in the morning and then came to sell them in the afternoon."
Nguyen Giang, a trader at the Phu Quy shop on Tran Nhan Tong Street, said, "I just bought dollars at a Bao Tin Minh Chau shop down the street and can sell them here now. It's great. I've earned about VND1mil in a few minutes."
By late afternoon, as the speculative fury eased off, the USD/VND rate fell back to about VND17,300.
Commenting on the spike in the US dollar on open market yesterday, the head of the State Bank of Viet Nam's Foreign Exchange Management Department, Nguyen Quang Huy, blamed increasing demand for the US dollar on enterprises, speculators and the nation's high inflation rate, which hit 25.2 per cent year on year in May.
He said the surge of the dollar on the open market would not be reflected in the official rate.
"I think that people should calm down at this time or they might pay dearly," Huy warned.
"The central bank has sufficient capacity to intervene in time to control any major change in the exchange rate and ensure that exchange rate fluctuations don't interfere with the business of credit institutions and the operations of enterprises," he said.
The US dollar has strengthened against the dong despite its overall weakness elsewhere, due to strong seasonal demand for imports and the recent State Bank move to devalue the dong.
Commercial banks have begun reportedly a critical shortage of dollars, with Vietcombank, the leading forex bank, reporting it was unable to buy enough dollars at listed exchange rates that had fallen far below the open market.
At some banks, importers have had to borrow in dong and then exchange to dollars, at considerable cost.
To ease the situation, the State Bank of Viet Nam yesterday reaffirmed to Viet Nam News that they would keep selling dollars to commercial banks to ease the situation, although they refused to say in what quantity.
At the same time, the central bank confirmed that they were devaluing the dong against the US dollar in order to support exporters and curb a trade deficit which had mounted to US$14.4bil in the first five months of the year.
Some international economists forecast a USD/VND rate surge to 16,500, or a 2.35 per cent depreciation of the dong, by the end of this year, a move that would make imports more expensive but also prevent a balance of payments crisis.
But an economist with the Central Institute for Economic Management said that devaluation of the dong was unlikely to reduce the import bill.
Vietnam still had to buy refined petroleum, fertiliser, construction materials, and spare parts to maintain and develop its economy, he said.
As a developing country, it would be unable to reduce its demand for these imports.
VNN
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