THE National Bank of Cambodia (NBC) has put out US$4 million for sale in a bid to stabilise the riel, which depreciated to a three-year low last week.
According to an NBC announcement, signed by Director General Tal Nay Im late last week, the bank is inviting bids from commercial banks, licenced money changers and companies to use riel to purchase four separate lots of $1 million.
NBC says it hopes that the sale will reduce the number of riel notes in circulation, thereby creating artificial demand for the currency and bolstering its worth.
“When less riel currency is on the markets, it will appreciate in value,” Tal Nay Im said on Sunday.
The first lot was sold on Friday to Tea Kim Hak Exhange – which offered a high bid of 4,228 riel per dollar – and further bids are expected to be received today, Wednesday and Friday at NBC’s headquarters in Phnom Penh.
The riel currency has lost 1.14 percent of its value in the past month. The exchange rate in Phnom Penh was recorded at 4,238 riel per US dollar on Sunday, from only 4,190 riel a month before, according data from Ly Hour, the capital’s largest money exchange.
According to statistics compiled by the Economic Intelligence Unit, the research arm of The Economist magazine, coupled with Post estimates, the riel’s average worth this month was the lowest for at least three years.
NBC’s director general said the reason for the excess of riel on the market, and thus for the currency’s poor performance, was seasonal.
A lack of agricultural transactions, which peak during harvest time, and tax payments, which are made in local currency, at this time of year has caused the currency to depreciate, she said.
Generally, the national bank of Cambodia (NBC) intervenes when the riel depreciates to a rate of more than 4,200 per US dollar. The last time such action was carried out was in late August of last year.
Tal Nay Im said last week that the bank had been watching exchange rates every day as the dollar has become stronger, a trend analysts have attributed to the fact that investors are reverting to safe assets because of European financial concerns.
Money exchangers said Sunday that they welcomed NBC’s intervention.
Sieng Lim, owner of Ly Hour Exchange, said Sunday that she always bids for dollar sell-offs. To be authorised to bid, she said, an applicant must file a deposit of 420 million riels (US$99,103) at the NBC.
“We joined the bidding. This did not mean we will gain a profit from it, because the exchange rate fluctuates irregularly, but we have to help the government to stabilise the riel,” she said.
Sieng Lim said that six or seven large exchangers had bid for the NBC’s dollars.
Cheam Teang, executive vice president chief of treasury and international cooperation officer at ACLEDA Bank, said Sunday that the bank had no plans to join the currency bidding.
But he added that the NBC normally uses its foreign reserves for such sales.
“It’s not difficult for the government to stabilise the riel, as its [NBC] foreign reserves are too high,” he said.
According to its own data, the NBC held $2.8 billion worth of foreign reserves as of the end of the first quarter of 2010.
Riel currency is used for about 10 percent of transactions in Cambodia. The rest are carried out in US dollars.
Contributed by: Nguon Sovan
City: Phnom Penh
Date: May 25, 2010
Credits: The Phnom Penh Post
Monday, May 24, 2010