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Tougher rule for black greenback market
The government has taken a tough stance on dollar speculation and illegal trading to cool the escalating unofficial exchange rate on the black market.
Under a government directive late last week, the central bank ordered all authorised foreign currency trading agents to sell the whole amounts of greenbacks they have bought from the public to commercial banks.
The new move is part of the central bank’s efforts to prevent illegal dollar transactions through trading agents’ prohibited reselling of purchased greenbacks. The transactions are a major reason behind the record high unofficial dong-to-dollar exchange rate of 18,200 on June 4 as people rushed to the black market for hoarding purposes. In the previous week, the unofficial exchange rate was pushed up to VND17,700 per dollar, caused by people’s dong depreciation fears.
“The sky-high rate was caused purely by public speculation with agents creating ‘illegal’ liquidity to the black market,” said Hoang Dinh Thang, the State Bank’s chief inspector. The escalating unofficial exchange rate has prompted the central bank to broadcast an alert to the public about black market speculation, possibly fuelled by several financial institutions.
Thang said the black market dollar fever would calm once the unofficial exchange rate was curbed.
After the central bank move, the black market’s exchange rate quickly fell to VND16,200-16,400 per dollar.
Thang said the State Bank’s Inspection Department would this week investigate foreign currency trading agents’ activities in Hanoi and Ho Chi Minh City.
“We will also supervise agents’ daily trading activities to ensure all foreign currencies bought [by these agents] from the public are sold to commercial banks at the end of the day,” he added. Under the Foreign Exchange Management Ordinance, agents are only authorised to buy foreign currencies from the public and resell them to commercial banks. Reselling to other buyers is prohibited.
Commercial banks are now only permitted to trade dollars 1 per cent either side of the State Bank’s daily official exchange rate. On June 6, the rate was set at VND16,124 per dollar on a continuous upward trend.
However, a Bank for Investment and Development of Vietnam (BIDV) source said foreign banks’ greenback demand was considerable with some even accepting a higher rate to buy dollars from domestic commercial banks.
On June 3, 2008, some foreign bank branches offered a rate at VND17,700 per dollar to buy from local banks via the interbank market.
Despite the dollar fever which has prompted a tightened control, a central bank source said the black market size was too small to affect the banking system. The source also said that Vietnam’s foreign currency reserves had not been affected despite the widening trade deficit which hit $14.4 billion over the first five months of 2008, almost equal to the level for the whole of 2007.
VNN
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