Iron hand controls currency trades

The move comes after the government showed its determination to bring the forex market back under control by arresting people trading US dollars illegally.

Last week, two employees of Khuong & Le Company withdrew $390,500 from deposit accounts at Eximbank under authorisation of the company’s general director. This act is legal.

Then they sold the amount to Thanh Trung Gold stall for Vietnamese dong. At exchange rate of VND21,580 per dollar, the amount fetched VND8.4 billion. During the exchange process, two employees of Khuong & Le Company and two traders of Thanh Trung Gold shop were arrested by police. The transaction was considered illegal as two traders of the gold shop were not licenced traders.

Last week, the State Bank with the intervention of other agencies such as Ministry of Public Security (MPS) enforced administrative controls over the foreign exchange market to eliminate dollar trading activities in the black market.

The same fervor happened in 2008, when the government had plain-clothes police posted at foreign exchange counters. 

Prime Minister Nguyen Tan Dung has stressed that the government would do anything to put forex market under control.

Nguyen Thi Kim Thanh, head of Banking Strategy Institute, said the arrests following the Khuong & Le Company’s transaction sent a strong message to the market participants that the toughest measures would be deployed if needed.

“Dollar trading on the unofficial market has jeopardised forex market as it triggered [US dollar] hoarding,” said Thanh.

Nguyen Thi Mai Suong, head of Hanoi branch of the State Bank, confirmed that the State Bank would cooperate with relevant authorities such as the MPS.

By end of last week, following the arrest, Vietnam dong gained in both the unofficial market and the interbank market for the first time against dollar since February.

On the unofficial market, dollar was quoted at VND21,400 per dollar from VND21,750 level in the previous week.

Nguyen Thanh Toai, deputy general director at Asia Commercial Bank, said the measures would encourage people to sell US dollars to the banking system.

According to State Bank data, US dollar denominated banking system deposits stand at around $20 billion.

“With intervention from other agencies, people have no other way than selling dollars to banks. This will improve dollar supply in coming time. By then, Vietnam dong might appreciate against the dollar,” said Thanh.