• Economics

National Bank to Sell $110 Million to Stabilize Riel’s Exchange Rate

• By Teng Yalirozy
• September 25, 2023 9:04 PM

PHNOM PENH – The National Bank of Cambodia (NBC) is releasing another $30 million in addition to the $80 million already released in auction throughout September to stabilize the riel currency exchange rate and to rebound the economy.

The $30 million auction will be done on Sept. 27 and Sept.29 with $15 million to be released on each date, according to an NBC statement dated Sept. 22.

The NBC has held several US dollar auctions with all banks, microfinance institutions and money changers since Sept. 6, totaling $80 million being released since the beginning of the month.

NBC released $10 million on Sept. 6, $15 million on Sept. 8, $10 million on Sept. 13, $25 million on Sept. 15, $10 million on Sept. 20 and another $ 10 million on Sept.22.

Each time, more than 10 financial institutions and money exchangers participated in the auction.

The move is to strengthen the purchasing power of the riel and contribute to the recovery of the national economy after the COVID-19 crisis as Cambodia is under pressure from the appreciation of the US dollar in international markets, NBC said.

On Sept. 22, the US dollar rose to its highest levels against the euro, the pound and the yen since at least March. After falling as low as 104.66 earlier in the day, the U.S. dollar index was higher at 105.6 prices as of Sept. 25.

The release of $80 million has helped maintain the riel exchange rate against the US dollar to an appropriate level for the market situation, but the National Bank will continue to intervene until the exchange rate situation in Cambodia stabilizes.

As of Sept. 25, one US dollar was equal to 4,116 riels, according to the daily exchange rate issued by NBC.

Hong Vannak, an economist at the Royal Academy of Cambodia, said that the USA is increasing its dollar value due to the Russia-Ukraine war, which is impacting international trade, that widely relies on dollars.

As Cambodia’s economy is largely dollarized, the country is striving to promote the use of the riel to counterbalance the rise of the dollar value, he said.

“When the dollar value is high, we need more riel to get a certain amount in dollars, which means businesses have to increase the prices of their products as well,” Vannak said.

The sell-off of dollars by the NBC aims to depreciate the rising value of the dollar and increase the comparative value of the riel, to rebalance the purchasing power of the Cambodian people.

NBC said the fluctuation of the US dollar in the international market and the evolution of the current macroeconomic situation in Cambodia led the Bank to continue to control the pressure on the currency market by further releasing US dollars, until the exchange rate is stabilized.

According to NBC, the auction will take place on Wednesday and Friday until the second weekend of October.

In 2021, NBC injected $554.2 million in cash to buy riels from the foreign exchange market to maintain the value of the riel in the economy.

In 2022, the Bank did not intervene in the exchange market. It was not until early September 2023 that the National Bank intervened in this market again as the US dollar continued to appreciate against other world currencies after the US Federal Reserve continued to raise interest rates.