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Bank rate for dollar rises above black market
The official exchange rate for the US dollar rose above the black market rate on Apr. 21 for the first time, following recent moves by the State Bank of Viet Nam (SBV) to fix the forex market.
Commercial banks yesterday quoted the dollar buy/sell prices at VND20,880/20,930 each while forex vendors on Ha Trung and Hang Bac were quietly trading at VND20,850/20,940.
The black market rate used to be VND1,000-1,500 higher than in banks, causing numerous problems for monetary policy makers.
The SBV in recent weeks has raised the USD/VND exchange rate on the interbank market every day in line with market moves, instead of leaving it unchanged as before. Yesterday, the interbank exchange rate was set at VND20,723 per dollar.
Many banks reported that they had already bought dollars from individuals and been able to sell them to those who were going abroad, said Nguyen Hoang Minh, Deputy Head of SBV's HCM City Branch.
The SBV has raised the compulsory reserve ratio, imposed on foreign currency deposits, from 4 per cent to 6 per cent, and set a cap of 3 per cent interest on personal foreign savings accounts and 1 per cent for institutions.
"The market response to the 3 per cent cap is very clear," Vietinbank's Chairman Pham Huy Hung said. "People are likely to prefer the Vietnamese dong and will swap their dollar deposits to dong for the more preferential interest, which in turn will help raise dollar reserves in banks."
Another FX official at a joint stock commercial bank in Ha Noi said that it was the first time the bank had been able to buy the dollar at the quoted price. In recent months, it had been exceeding the SBV's price cap to avoid losing customers to the black market.
Another FX official at Vietcombank's branch on Ha Noi's Ngo Quyen street said that the branch had raised the amount of dollars individuals could buy from US$100 to $500.
Techcombank and VP Bank also said they would sell $1,000-5,000 to individuals with all the required documents.
On the other hand, forex trading on the black market seems to have come to a standstill.
"Trading is very low because our rates are nearly the same as the banks. People are also scared of trading with us, in case they are caught by the authorities," said Khanh, a vendor on Ha Noi's Ha Trung street, a popular black market spot.
Le Xuan Nghia, Deputy Chairman of the National Finance Supervision Council proposed that strong measures had bought about a positive change to the market, and helped lift pressure on the dong.
The SBV is also in the process of polling public opinion on a new draft regulation for the gold market, as well as shutting down gold trading at commercial banks.
A road to stop gold trading in commercial banks may be embarked upon from May this year to May 2013, giving banks two years to pay off existing contracts without causing any negative effects to capital structure or liquidity.
Commercial banks have dramatically reduced interest rates for gold deposits and eliminated long term deposits in February, bringing the interest down to 0.00-1.10 per cent for terms under 12 months.
In terms of gold market management, Tran Du Lich, a member of the National Monetary Policy Advisory Council cum National Assembly Deputy for HCM City, said that the central bank should issue new regulations to stop gold bars being traded "like a bunch of vegetables."
"When I talked to voters, they agreed that the Government should do something about the situation, but urged authorities to continue to allow civilians to buy gold bars," Lich said.
Lich said that in Russia, people could buy and sell gold bars at banks that were authorised by their central bank. In that way, the country maintained control of the market, and people kept their right to buy gold.
Five companies currently cast their own branded gold bars in Viet Nam, but Le Xuan Nghia said that the Government may choose to centralise the casting of bars at the SBV.
Gold dealers yesterday quoted sell/buy prices at VND37.6-37.73 million ($1,796-1,802) per tael (One tael equals to 1.2 ounces), mostly driven by the strong surge in the global gold price.
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