Rush to sell dollars to stop losses

VietNamNet Bridge – The dollar price has been decreasing in recent days, which has prompted people to rush to sell dollars to stop losses. Meanwhile, the free market has halted transactions, which has been blamed on the drastic measures by the State Bank of Vietnam to stabilize the dollar price.

The dollar market has been continuously going up and down since February 24, one day after the government announced the resolution to stabilize the macro economy. However, the downward trend proves to be clearer. On March 4, after a lot of ups and down, the dollar price on the black market dropped to 21,730-21,800 dong per dollar (purchase and sale prices), a decrease of 700 dong per dollar from the price one week earlier.

Analysts say since Tet, people are uninterested in the dollar . Investors wish to “dispose” the dollars they have, while foreign currency exchange shops “turn their back” to the proposals to purchase dollars, therefore, they offer a record high gap between the purchase and sale prices of 150-200 dong per dollar.

Rushing to sell dollars

Until March 7, the black market had been very bustling, but most of the visitors to the market were sellers. Bich Ngoc in District 1 in HCM City told Dat Viet that she brought 3000 dollars to a foreign exchange shop on Dong Khoi street to sell on March 1. “Some days ago, I bought dollars at 21,900 dong per dollar, but today I have to sell at 21,700 dong. Despite the loss, I have to sell because I fear the dollar price may drop further,” she said.

Fearing the dollar price will continue decreasing as a result of the drastic measures applied by the State Bank of Vietnam, a lot of people have been rushing to sell dollars to prevent losses. The owner of KD Gold Shop on Nguyen Thai Binh Road in Tan Binh district in HCM City said the dollar has plummeted because people are rushing to sell out, even though foreign exchange shops have widened the gap between the sale and the purchase prices.

“We dare not take on dollars in big quantities. We only purchase dollars from loyal clients to keep good relations with them,” she said.

On March 2, when the dollar price on the black market dropped to 21,640 dong per dollar, those people who could not sell dollars tried to deposit dollars at banks.

Nguyen Thi Thuy, a client seen making transactions at ACB in HCM City related that she had withdrawn dollar deposits at the bank to sell on the black market, but gold shops have refused to buy her dollars. Therefore, she has come back to the bank to deposit dollars. The interest rate is 4.35 percent per annum.

Where to invest?

“I don’t want to keep dollars because I am afraid the dollar will depreciate, but I don’t want to keep dong as well. It is too risky to buy gold at this moment,” said Hoang Van Nguyen in Thu Duc District in HCM City, who has sold 7000 dollars.

“I have heard that some banks are offering high interest rates of 17-18 percent per annum. So I have decided to deposit at banks. I will think about what I should do later,” he said.

Pham Thi Thuy Duong, who has withdrawn deposits from Techcombank, also complained that she does not know what to do with her money. “So I have to make deposits at banks,” she said.

Hanoi’s dollar market halts transactions

To many people’s surprise, the black market in Hanoi unexpectedly halted transactions in the afternoon of March 7. The market opened in the morning with the opening prices of 21,500-21,680 dong per dollar. However, many people, who brought dollars to sell in the afternoon, realized that many exchange shops closed the doors.

Bringing with herself 20 million dong to Ha Trung street, which is called the “foreign currency street” in Hanoi, Nguyen Kim Hanh, a cosmetics trader, was told that the shop had stopped transactions. Hanh still wonders where to buy dollars, because she needs dollars to import goods for sale.

The Bao Tin Minh Chau Gold, Silver and Gemstone Company has also halted dollar transactions at all of its three transaction points in Hanoi.

Representative of a exchange shop in Hanoi said that negative information has appeared on the market since March 4. Some sources said that the central bank will inspect authorized exchange shops and apply drastic measures to force the prices down.

Besides, in recent days, the dollar price has been decreasing continuously, thus causing losses to dollar traders. Therefore, many dollar traders have decided to halt transactions.

Le Khac

Greenback black market price rises by VND 50/US $1

The foreign currency market kicks off a new week with the greenback price on the black market increasing by VND 50/US $1 over late last week to VND 17,280/US $1. The gold market remains quiet, with the price going the cross-line.

Foreign currency exchange shops on Ha Trung street in Hanoi this morning quoted the dollar prices at VND 17,250/US $1 (purchase) and VND 17,280/US $1 (sale), an increase of VND 50/US $1 since the end of last week.

Today, the State Bank of Vietnam announced the inter-bank exchange rate at VND 16,490/US $1, while commercial banks quoted the prices at VND 16,983 (purchase) and VND 16,985/US $1 (sale).

In the last week, the VND/US$ exchange rate quoted by commercial banks were always at the ceiling allowed levels, hovering around VND 16,975-16,980/US $1.

The State Bank of Vietnam has affirmed that it is keeping a close watch over the market performance, while following a flexible forex management policy, which aims to control the trade deficit and stabilize the macro-economy.

As for the gold market, the prices have not increased or decreased, remaining quiet with low transaction volume. SJC gold is now selling at VND 16.55 million/tael (purchase) and VND 16.65 million/tael (sale). Meanwhile, Bao Tin Minh Chau gold prices are VND 16.52 million - 16.6 million/tael.

On ACB gold trading floor, SJC gold was traded at VND 16.1 million/tael. Only 48,260 taels of gold successfully changed hands this morning, worth VND 776 billion.

In the world, the gold price (with spot delivery) quoted on Kitco.com is $763.5/oz. The domestic gold price is approximately VND 400,000/tael higher than the world’s price.



(Source: Dan tri)

Vietnam dong drops in black market on fuel price rise

Heavy demand for dollars pushed the Vietnamese dong down by 4.5 percent in black market deals on Monday, as locals feared a fresh spurt in inflation after the government raised fuel prices by as much as a third.
Offshore forwards trading priced in a deeper fall in the dong in one-year's time compared with levels on Friday.
Selling dollars for dong is unlawful in Vietnam unless conducted by authorised dealers and banks. Many locals however approach gold shops and money changers to illicitly buy dollars.
"People want to safeguard their wealth against expected higher inflation," a black market dollar dealer said.
One dollar was changing hands for 17,500 dong on the black market, 4.5 percent weaker than 16,700 levels earlier in the day before fuel prices were raised.
"The dollar could go up to as much as 18,000 dong this week as people feel the heat from the higher fuel prices," a private currency dealer said.
In the official market, the dong was traded around 16,700 per dollar, within the 2 percent trading band prescribed by the central bank around a mid-point it sets daily. It set the mid point on Monday at 16,500 dong per dollar.
The official market and the black market had nearly converged last week, as the central bank's efforts to clamp down on the black market, intervention to defend the dong and restrictions on banks had led lifted sentiment. The dong had been transacted for as low as 19,000 in the black market in June.
But analysts expect Monday's increase in fuel prices to push Vietnam's annual inflation rate above 30 percent. It hit an annual rate of 26.8 percent in June as food prices soared and has been in double digits for eight consecutive months. Continued...

continued--->>>Vietnam dong drops in black market on fuel price rise Markets Reuters

Vietnam Dong Investors Use Black Market for Dollars

Vietnam's currency controls are forcing foreign investors into the black market to obtain dollars, aggravating declines in the world's worst-performing stock market and pushing benchmark bond yields above 20 percent.
Businesses that aren't controlled by the government pay about 7 percent more than the official rate when using the dong to buy dollars because the state gives its trading companies priority access to the U.S. currency, the World Bank said. The premium is reducing demand for the nation's stocks and bonds, according to PXP Vietnam Asset Management.
``There is clearly a shortage of dollars,'' said Kevin Snowball, a money manager at PXP Vietnam in Ho Chi Minh City, which oversees $117 million. ``If you have dollars and you want to buy dong, you will get the official rate, but if you have dong and you want to buy dollars it's a completely different story.''
Vietnam's financial markets are tumbling after the central bank raised interest rates three times this year to 14 percent to tame inflation that accelerated to a 16-year high of 26.8 percent in June. The economy expanded 6.5 percent in the first half, the slowest in at least seven years, while the trade deficit more than doubled to $14.8 billion.
Rally to Rout
Vietnam's benchmark stock index, which climbed 168 percent in the past two years as Prime Minister Nguyen Tan Dung encouraged state companies to raise cash and finance expansion, slumped 53 percent since December. Yields on five-year government bonds jumped to 20.53 percent on June 13, the highest since at least July 2006, from 8.71 percent on Jan. 3.
The dong has dropped 5 percent this year, its biggest decline since 1998, to 16,846.5 per dollar as of 4:40 p.m. in Hanoi. Traders are pricing in an 18 percent drop in the coming year to 20,500, according to offshore 12-month non-deliverable forwards. The contract was at 16,080 on Dec. 31. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars.
The official rate will fall 6.4 percent to 18,000 by the end of the year, according to Calyon, the investment banking arm of Credit Agricole SA. HSBC Holdings Plc, Europe's biggest bank by market value, predicts it will strengthen 4.4 percent to 16,140 by year-end.
`Currency Crisis'
Vietnam may suffer a ``currency crisis'' similar to the slump in the Thai baht that triggered the regional collapse in 1997, Morgan Stanley analysts said in a report May 28.
``The central bank is not providing dollars, except to some importers and some working capital for exporters,'' said Noritaka Akamatsu, a Hanoi-based economist for the World Bank. ``That's why there is some depreciation pressure.''
The State Bank of Vietnam allows the currency to trade 2 percent either side of its daily reference rate. Gold shops and street money changers offer a black market rate of about 18,000, said Akamatsu. Banks offer a similar rate by adding fees to sell dollars, he said. The rate was as high as 19,500, he said.
The dong slumped in the forwards market in May as foreign investors trapped in the bond market bet against the currency to hedge against losses, Akamatsu said.

more info-->>>Bloomberg.com: Worldwide

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.