Logo of Phnom Penh Post newspaper Phnom Penh Post - Riel continues to depreciate

Riel continues to depreciate

Riel continues to depreciate

Strong dollar and eurozone worries hobble NBC efforts to stabilise currency

THE riel continued to depreciate against the US dollar last week despite a US$4 million National Bank of Cambodia (NBC) intervention aimed at increasing its value, experts say.

The NBC dipped into its dollar reserves to purchase riel on May 21 in an attempt to shore up the Cambodian currency’s value.

Ly Hour Exchange owner Sieng Lim said the $4 million intervention had been too small to stop the depreciation of the riel, and that its decline is partly the result of a strengthening US dollar.

The riel traded at 4,260 per dollar on Sunday, down 0.52 percent for the week from 4,238 on May 23. The riel has lost 1.67 percent of its value over the last 45 days, down from 4,190 riel per US dollar in mid-April, according to statistics from Ly Hour Exchange.

However, Sieng Lim said the central bank deliberately intervenes gradually in the Kingdom’s currency, a policy she said she supports.

“When the value of the riel fluctuates, normally the NBC spends US dollars to stabilise the riel, or increase or decrease the prices slightly,” she said on Sunday.

“If the NBC injected more US dollars [to purchase riels], the riel’s value would appreciate quickly, affecting people and the price of goods.”

Most international currencies have been dropping against the US dollar, she added, pointing out €1 was worth $1.23 on Sunday, a 12 percent decline from $1.40 for the same date last month.

Cambodia Institute for Development Study president Kang Chandararot said the intervention had been limited by its small size, having only a slight impact on the riel’s exchange rate.

“NBC should release further US dollar reserves to stabilise the riel – each intervention should be around $10 million,” he said. He added that further interventions should be gradually conducted to avoid sharply appreciating the riel and impacting trade.

He estimated that some $500 million worth of riel is in circulation, said that slowing inflows of trade and investment denominated in US dollars have contributed to the recent strength of the greenback against the Kingdom’s currency.

The riel’s exchange rates closely parallel that of the European Union’s currency, he added. “Recent depreciation of the euro also influenced the riel’s depreciation. When the euro has stabilised, so has the riel.”

NBC Director General Tal Nay Im declined to comment on Sunday, but said in a previous interview that the NBC scrutinises exchange rates every day. Analysts have attributed the recent strength of the US dollar to investors reverting to safe assets because of European financial concerns.

The middle of the year is also a traditional soft spot for the riel’s value, according to International Monetary Fund (IMF) data. The currency generally peaks in December and January, as increased tourism brings in additional dollars, and the harvest leads to more transactions denominated in riel.

Generally, the NBC intervenes when the riel drops below 4,200 to the dollar by dipping into its foreign reserves to buy Cambodia’s currency.
It held $2.8 billion in foreign reserves at the end of the first quarter of 2010, according to NBC data.

MOST VIEWED

  • ‘Education’ a priority traffic-law penalty

    A top National Police official on June 21 neither rejected nor confirmed the authenticity of a leaked audio message, which has gone viral on social media, on a waiver of fines for a number of road traffic-related offences. General Him Yan, deputy National Police chief in

  • Siem Reap’s $18M zoo said to educate public, help wildlife

    Angkor Wildlife and Aquarium Co Ltd has invested $18 million in a zoo in Siem Reap province, which will be opened in October to educate and promote animal conservation as well as attract national and international tourists. Currently, the Angkor Wildlife and Aquarium is building the

  • Volunteer scheme to foster ‘virtuous’ humanitarian spirit

    A senior education official said volunteer work contributes to solidarity and promotes a virtuous humanitarian spirit among the youth and communities. Serei Chumneas, undersecretary of state at the Ministry of Education, Youth and Sport, made the comment during the opening of a training programme called “

  • Chinese firms unveil preliminary results on metro, monorail for capital

    Minister of Public Works and Transport Sun Chanthol and representatives from China Road and Bridge Corp (CRBC) and its parent company, the state-owned China Communications Construction Co Ltd (CCCC), met on June 24 for talks on results of the firms’ preliminary study on a potential metro

  • Nestle’s debut may spur dairy market

    Leading confectionery manufacturer Nestle plans to invest in Cambodia by setting up an operation in the near future, a move majorly hailed by local dairy farmers as a means of boosting the fresh milk market in the Kingdom. During a visit by a delegation led

  • ACLEDA, WU to enable global money transfers

    Cambodia's largest commercial bank by total assets ACLEDA Bank Plc and global money transfer firm Western Union (WU) have partnered to offer customers cross-border money transfers to 200 countries via “ACLEDA mobile” app. In Channy, president and group managing director of ACLEDA, said the June 22 agreement