HCMC – The U.S. dollar surged to a new record high of VND20,000 per dollar on the unofficial market on Tuesday and as a result businesses are seeking to hold on to the greenback for fear of foreign exchange risk.
The dollar on the underground market on Tuesday afternoon traded at VND19,980 for buying and VND20,020 for selling, up VND50 from the previous day and VND170 from late last week.
Reportedly rumors that the central bank would continue devaluing the Vietnam dong were behind the dollar rally on the unofficial market on Monday. However, the central bank governor, Nguyen Van Giau, on Tuesday affirmed in Saigon Giai Phong newspaper that there would be no more dong devaluation but his message did not appease the market.
The central bank has yet to take a single move to ease the dollar fervor. Commercial banks on Tuesday quoted the dollar selling price at VND19,500 per dollar although no companies could buy the dollar at that price.
Corporate clients must now pay extra fees to buy dollars at banks, virtually appreciating the dollar versus the dong.
There are no official reasons for the dollar jump but market watchers said shaky confidence in the local currency had led to volatility on the foreign exchange market, so any rumors could drive the dong down.
When the dong fell to VND20,000 per dollar, the dollar price in futures contracts on Asian markets on Tuesday afternoon was VND19,950 for one month and VND21,520 for one year.
There are signs that enterprises are holding on to dollar funds on their bank accounts. A source from the State-owned bank BIDV told the Daily BIDV’s dollar purchases had dipped strongly recently, because corporate customers declined to sell.
Individuals are also speculating on the dollar, the source said.
According to a report by the central bank’s HCMC Branch by late August, dollar purchases from enterprises accounted for 40% of the city-based banks’ total.
If enterprises had sold the dollar to banks last week, it would have lost VND500 for each dollar. Therefore, no one wants to sell dollars to banks given the continued price increase of the dollar on the unofficial market, the source said.
Meanwhile, companies having dollar debt are rushing to buy dollars for premature payment.
Outstanding dollar loans rose sharply in the first nine months of this year, and in HCMC alone, dollar credit expanded by a whopping 36.4%.
Dollar supply is in decline while dollar demand is sharply up, leading to a sudden imbalance on the foreign exchange market, the source said. However, the source affirmed BIDV could meet all legitimate corporate needs for dollars.
Meanwhile, the general director of a joint-stock bank told the Daily that dollar funds were ample but prohibitively high prices really mattered.
