Hanoi - The US dollar rose sharply against the Vietnamese dong Tuesday on the country's black market as the central bank failed to keep up with demand for the foreign currency. Gold shops and black market traders were selling dollars at 19,000 dong each, while the government's reference rate remained at 16,936 and commercial banks asked 17,872 dong to the dollar. Banks are allowed to trade within a band of 3 per cent on either side of the reference rate.
In Ho Chi Minh City, some shops were asking 19,100 dong to the dollar.
"The imbalance of dollars in Vietnam is real now," said Le Dang Doanh, former director of the Central Institute for Economic Management. "Demand for dollars is increasing fast, while supplies from banks are limited. So companies need to mobilize other sources."
Doanh said Vietnamese companies generally need more dollars towards the end of the year to import goods. Demand for imported goods rises in advance of the Vietnamese New Year, or Tet, in early February.
Nguyen Duc Vinh, chairman of the board of Techcombank, the fourth-largest commercial bank in Vietnam, said stringent State Bank regulations limited businesses' ability to borrow dollars.
Doanh said the inflow of dollars from foreign direct investment and from remittances from overseas Vietnamese had declined due to the global economic crisis.
In addition, the price of gold in Vietnam is substantially higher than elsewhere. Some companies are reportedly seeking dollars to import gold for resale.
Gold stood at 26,700,000 dong per tael on Tuesday in Vietnam, or 1,494 dollars at the bank exchange rate. The world gold price was 1,102 dollars per ounce, or 1,324 dollars per tael.
Nguyen Thanh Hai, director of the Vietnam Veterinary Development Company, said the volatile exchange rate was leading companies to seek dollars on the black market rather than borrow at banks and expose themselves to currency risk.
