Dollar trading concerns raised

Hanoi (VNA) - A surprise move on May 17 which saw several commercial banks raising dollar selling prices to the maximum permitted level and then reducing prices late in the afternoon triggered concerns about dollar trading in the system.

The State Bank of Vietnam set the interbank rate at 20.673,00 VND per US dollar, allowing commercial banks to trade the dollar between 20,466.27 VND and 20,879.73 VND.

The selling prices at dollar-strong traders like Vietcombank, Eximbank, Sacombank and DongA Bank were at 20,880 VND in the morning, or about 270 VND higher than the previous prices.

Prices were then cut to under 20,800 VND per dollar in afternoon trading.

"The rate is quite normal," Vietcombank's Executive Board Member Le Thi Hoa told the English-language daily Vietnam News in a phone interview on May 17. "Look at the buying and selling prices: there is a large gap. It's only when the two prices are the same, that there's a problem."

However, the decision to raise the dollar price to its maximum permitted level had not been taken since April 21 when the central bank injected flexibility into the interbank rate in line with market moves.

Le Duc Tho, deputy general director of Vietinbank, an institution which did not raise the dollar price on the same day, told Vietnam News: "The price adjustment just depends on supply and demand on the market. Nearly 40 joint stocks banks are competing fiercely to do business so they have to keep a close eye on their prices."

Both Vietinbank and Vietcombank executives agreed that dollar sources and dollar trading at the banks were very good.

"Actually, it's very hard to say anything because of the inconsistent management of authorities," a senior expert with Ocean Securities told Vietnam News. "Banks buy and they themselves sell dollars. They can do what they want because the black market is frozen."

Dealers on the non-deliverable forward (NDF) currency futures market on May 17 traded the Vietnamese dong for next month at 20,880.010 VND.

The outright three-month rate was 21,380.030 VND and the outright six-month rate was 21,829.830 VND.

The rate for outright 12 months was 22,744.320 VND per US dollar, a change of 0.097-0.004 percent against May 16.

On February 11, the central bank devalued the dong by 9 percent to 20,693 VND per dollar from 18,932 VND. It also narrowed the trading band around the midpoint to 1 percent from 3 percent.

This led to a general lowering of the interbank rate.

On the dong market, the repo interest rate on Open Market Operation (OMO) on May 17 was up 1 percentage point to 15 percent per year - the highest level since late April. However, Governor Nguyen Van Giau of the State Bank told Vietnam News that this was nothing special.

"OMO is a market. The interest rate on the market keeps changing, depending on supply and demand," Giau said.

In the week from May 9 and 13, the State Bank of Vietnam made a net injection of 2.131 trillion VND (102.45 million USD) on OMO when it poured 103.589 trillion VND (4.98 billion USD) into OMO and withdrew 101.458 trillion VND (4.87 billion USD).

Since early May, the repo interest rate on OMO has stood at 14 percent per year in accordance with the State Bank's new regulations./.