The monetary authority said Wednesday it will start a probe into foreign-exchange trading at banks after reports the official trading band for the dong was being breached.
“We decided to conduct the inspection, which will start pretty soon, after calls to our telephone hotlines reported on violations in currency trading at some local and foreign banks,” Dao Minh Tu, head of the central bank governor’s office, said by phone on Thursday. He declined to name the banks involved.
Vietnam joins South Korea and Taiwan in investigating the trading activities of overseas banks in the past year as regional governments seek to limit volatility in their currencies. The Southeast Asian nation’s currency was devalued for the fourth time in 15 months on Feb. 11 and may come under pressure after the government last month projected a trade deficit of as much as $12.8 billion for next year.
The central bank has raised fines sevenfold for illegal foreign-currency trading to a range of VND300 million ($14,280) to VND500 million, from between 45 million dong and 70 million dong previously, according to a statement posted Oct. 21 on the government’s website.
Dong trading range
“There are some financial institutions, foreign banks’ branches trading foreign currencies at exchange rates beyond the central bank’s band,” the State Bank of Vietnam said in a statement late Wednesday on its website. This hampers government efforts to stabilize the exchange rate, it said.
Banks in Vietnam are allowed to trade the dong up to 1 percent on either side of a daily reference rate set by the monetary authority.
The dong was unchanged in the official market at 21,009 per dollar as of 5:08 p.m. Thursday in Hanoi, according to data compiled by Bloomberg. The central bank fixed the daily reference rate at 20,803 for a fifth day today, according to its website.
The central bank sold at least $150 million into the local currency market in October to stabilize the dong amid rising demand for US dollars, Thoi Bao Ngan Hang newspaper, a publication of the State Bank, reported Oct. 14, citing unidentified sources. The exchange rate was as weak as VND21,600 in the so-called black market in October, the report said.