The National Bank of Cambodia (NBC) on Tuesday called for licensed banks, microfinance institutions (MFIs) and money changers to join a $50 million foreign exchange (forex) intervention auction.
The auction is scheduled for later this week and is intended to stabilise the local currency and maintain macroeconomic stability, the NBC said.
“The minimum bid will be announced on the morning of the actual bidding date,” the NBC said in an announcement.
NBC director-general Chea Serey said forex rates have seen substantial currency fluctuations in the region from the Covid-19-borne economic slump. The Cambodian riel is no exception.
“This year’s exchange rates between the riel and the US dollar have veered off a bit from trends set in previous years.
“The NBC has decided to intervene in the exchange rate with the auction. This is to reinforce the purchasing power of the riel, maintain price stability and stabilise the macroeconomy as a means to boost the livelihood of the people,” she said.
Anthony Galliano, the CEO of financial services firm Cambodia Investment Management Co Ltd, told The Post on Tuesday that the central bank’s intervention serves to strengthen the vitality of the local currency against the greenback.
“The NBC intervention in the currency markets is likely linked to the recent strength of the US dollar versus the Khmer riel, which is now trending above 4,100.
“The strategic initiative of increased use of riel for financial transactions in the economy means a higher amount of riel would be required for US dollar based purchases, if the riel depreciates,” he said.
He noted that depreciation would result in inflation in terms of riel, but that it is of no real concern now and within routine trading range.
“As Cambodia is in a nascent phase of Khmer riel notes as an eventual replacement of $1 and $5 dollar notes, the strength of the US dollar may discourage consumer use if it is perceived as a stronger currency.
“Selling of USD by the NBC should have the effect of strengthening the riel, given the market for the riel is not very deep, and in reality not an internationally traded currency open to speculators,” Galliano said.