CURRENCY TRADING INFOR

“The ban on third-currency trading goes in the wrong direction since it takes away the arbitrage channels that normally serve to make the market deeper and more efficient,” Paul Gruenwald, an economist at Australia & New Zealand Banking Group Ltd., wrote in a recent note to clients. “This is equivalent to banning the parallel market.”

A more efficient way to seek the much-needed convergence between the official and the unofficial exchange rates would be for the State Bank of Vietnam to show strong commitment to sell dollars from its foreign-exchange reserves in the market.

This would ease a perceived shortage of dollars and give greater confidence to the Vietnamese people to hold local currency assets. The “trick,” Gruenwald says, is to ensure that domestic confidence is not lost.

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