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12 May 2009

Vietnam tightens grip on forex transactions

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Vietnamese government has asked authorities including the police to help regulate foreign exchange transactions as part of efforts to reduce dollarisation in the economy and control dollar rates in the black market, reported Reuters.

“Gold shops that trade dollar at rates different from the central bank's and shops that sell motorcycles and cars as well as property transactions denominated in the USD have caused great damage to consumers,” the government said in a report seen on Monday.

The report quoted Prime Minister Nguyen Tan Dung as asking the police and city governments of Hanoi and Ho Chi Minh City to increase inspection and crack down on unregulated forex trading and advertising and selling of products in foreign currencies, which are very common in Vietnam.

Central bank has tried to regulate such illegal dealings but without much success.

The dollar has been hovering around 18,250 dong on unofficial markets such as gold shops in the past month, or nearly 8 percent higher than the central bank's mid-point reference rate, on worries that weak exports and declining foreign investment would weigh on the economy, dealers said.

The dong is legally allowed to trade within a band that spans 5 per cent on either side of the refence rate.

Last month the central bank said Vietnam's foreign exchange reserves remained stable at more than $20 billion and banks had ample dollar funds.




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