Bank staff arrange stacks of dollar notes at a bank in Hanoi
On June 28 the State Bank of Vietnam increased the dong-dollar exchange rate by 1 percent, setting the ceiling price at VND21,246.
Not long afterwards many banks increased their rates to the maximum, and some even exceeded it.
A report by the Ho Chi Minh Securities Corporation said that on July 8 the interbank rate was VND21,375, an increase of 0.4 percent over July 5, and 0.61 percent higher than the ceiling rate, online newspaper VnEconomy reported.
Speaking to Vietweek, many businesses complained they were finding it difficult to buy dollars from the banks, and others said they were charged higher than the regulated price.
Nguyen Tien D., who runs a company in the northern province of Ninh Binh that imports machines and spare parts, said he recently bought dollars from local banks at prices higher than maximum allowed by the central bank.
Following the businesses' complaints, Vietweek reporters visited the branch of a major bank in Cau Giay District, Hanoi.
When the reporters said they wanted to buy dollars, an employee told them that they would have to pay an extra fee, pushing the dollar's price to VND21,500 instead of the maximum of VND21,246 mandated by the central bank.
The additional fee will be declared as delivery and counting charges, the employee said.
"Recently US dollars have become very rare," as export companies have refused to sell dollars to banks or were charging higher prices, the employee said, explaining the extra fee.
Asked if the bank was aware that the fee was a violation of laws, the employee said, "it can't be helped."
An official with another major bank in the capital city also said exporters were holding on to their dollars, expecting the dong to fall further.
Businesses that need dollars also prefer to get lower-rate dong loans from banks and use the money buy dollars from either the banks themselves or the black market, said the banker, who wished to stay anonymous.
Statistics compiled by the central bank show that at the end of June, dong loans had increased by 7.5 percent, while dollar credit decreased by nearly 10 percent.
Another banker said the increase in demand for dollars was also because many banks had started buying the greenback after selling them to give out dong loans with higher interest rates.
However, the general director of a bank, who did not want to be named, said large banks should take the blame. He said they had increased their dollar prices, expecting that the banking system will boost lending, including dollar loans, to meet the credit growth target of 12 percent set for 2013.
Furthermore, businesses will need dollars to buy raw materials as production increases during the second half of the year, he said.
When big banks raise their exchange rates, smaller ones have to follow suit, an economist told Vietweek.
On the other hand, speaking to online newspaper VnExpress this week, Tran Hoang Ngan, a member of the National Assembly's Economic Commission, said the central bank needs to clarify if both businesses and commercial banks are engaging in speculation.
The legislator said official figures imply that there is no short supply of dollars.
In the first half of the year, US$5.7 billion in foreign direct investment and another $2.2 billion in official development assistance was disbursed, apart from dollar remittances made by overseas Vietnamese, he said.
Ngan said another possible reason for the dollar becoming dearer could be recent developments in the gold market.
With the gap between domestic and world gold prices rising to around VND6-7 million per tael, there is a possibility that the precious metal was being smuggled into Vietnam, leading to a higher demand for dollars, he said.
Therefore, authorities also need to clarify if gold smuggling is taking place, he added.
Cao Si Kiem, former governor of the central bank, said that recent happenings in the foreign exchange market prove that the central bank's one percent increase in the dong-dollar rate was not enough to stop speculation.
The Ho Chi Minh Securities Corporation also suggested in its report that the
central bank improves its management of the unofficial forex market to curb speculation.
Other solutions include bringing domestic gold prices down, pumping dollars to increase liquidity in the interbank market, and making more adjustments to the interbank rate, it said.
The central bank has pledged that it would keep the rate stable and not allow the dong to fall by more than 3 percent this year.
In an interview with Tuoi Tre newspaper, Le Minh Hung, deputy governor of the State Bank of Vietnam, said the recent increases in the exchange rate was a "psychological impact," and the market's liquidity was "normal."
Businesses' demand for dollars was "basically" being met, he said.
"The state bank is monitoring market developments and will apply stabilization measures when necessary," Hung said.
He said the central bank will investigate reports about additional fees being charged by some banks for foreign exchange transactions and strictly punish violators.
The state bank has bought around five billion dollars to bolster its foreign exchange reserves, said Nguyen Dong Tien, another deputy governor.
He said Vietnam expects to see a surplus of $4-5 billion in its foreign exchange balance of payments this year.
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