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Riel value slumps to new low

Exchange rate falls to 4,235 riels per dollar amid gradual depreciation in 2010

THE value of the riel reached a year low on Monday potentially pushing up inflation and affecting Cambodians’ purchasing power, commentators said. 

The riel currency has lost 1.07 percent of its value against the US dollar within the past month, according to rates recorded by Ly Hour Exchange. 

On Monday, one US dollar was worth 4,235 riels, up from 4,190 riels per dollar at this time last month. 

“We have seen that the riel has gradually depreciated in value against US dollar during the last month,” said Sieng Lim, the owner of Cambodia’s Ly Hour Exchange, on Monday. 

“Normally, when riel notes are abundant on the markets, its value is depreciated,” she added.

The rate, estimates for which can vary among agencies, has sparked concern among some members of the Kingdom’s business community.

Chan Sophal, president of Cambodia Economic Association, said that, theoretically, the riel depreciation could be due to a decline in the inflow of US dollars to Cambodia. He could not comment further on why the riel has lost value.

The depreciation, he said, would affect purchasing power and pushes up inflation as the price of goods increases.

“People with wages in riel currency would suffer the most from the depreciation,” he said.

He pointed out that the garment industry, which carries out transactions in US dollars, would not suffer and added that as the circulation of riel in Cambodia is relatively small, it would be easy for the government to raise its value.

“It’s not difficult to stabilise the riel because it constitutes 10 percent of total money supply,” he said.

Generally, the National Bank of Cambodia (NBC) intervenes when the riel depreciates, by selling US dollars to buy riels when the exchange rate reaches 4,200. 

In August last year, it announced it would dip into its foreign reserves to buy $6 million worth of Cambodian riels to hold up the value of the local currency, which had reached 4,191 against the greenback.

But since the start of this year, Cambodia has not seen any NBC intervention against depreciation.

Tal Nay Im, NBC’s director general, did not pick up the phone after repeated calls on Monday.

Some analysts believe the depreciation may be a blip. Cheam Teang, Executive Vice President Chief of Treasury and International Cooperation Officer at ACLEDA Bank, said Monday that it is seasonal trend. He said he believes that, as the depreciation is small, it will not have much of an impact on the economy. 

“In my own observations, at this time of the year riel currency is always depreciated, and it would recover the value in the last quarter of the year. 

The depreciation is just around 1 percent – it’s normal, and it’s no surprise” he said. 

“But it fuels some rise in inflation too,” he warned.

The Kingdom’s consumer price index, recorded by the National Institute of Statistics, saw inflation rise to 7 percent in March.


Contributed by: Nguon Sovan 
City: Phnom Penh
Country: Cambodia
SJ510201014
Date: May 19, 2010

Credits: The Phnom Penh Post
Tuesday, May 18, 2010
 
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