A recent study on the role of Cambodia’s moneychangers found that three private forex traders control two-thirds of the total demand for riel currency and exert more influence on foreign currency exchange rates than the central bank, raising the possibility of collusion in fixing rates.

Leng Soklong, an economic researcher at the National Bank of Cambodia (NBC), said during a presentation late last month that the behaviour of just a few large moneychangers in Phnom Penh directly and indirectly influences the operating costs of various economic agents and is the main factor in determining forex rates in other parts of the country.

According to his study, Role of Money Changers in Dollarization: Evidence from Survey, 66 percent of moneychangers said they relied on Phnom Penh-based moneychangers to determine their daily foreign currency exchange rates, compared to just 6 percent who used the NBC’s exchange rates as their benchmark.

“They [moneychangers] have a nationwide network, so they can allocate currency based on the demands of the economy, and they also have influence on the exchange rate transmitted by the central bank,” he said.

According to the study, three big Phnom Penh-based moneychangers, who he did not name, dominate the market and appear to be the main determinant in establishing the daily forex rates observed across the country.

“If there is possibility for collusion or speculation, we don’t know yet,” he said. “We will have to study that.”

NBC director-general Chea Serey explained that three big moneychangers dominate the market in terms of volume and value because local commercial banks conduct very limited foreign exchange transactions.

However, she said in the past two years that trend is rapidly changing, with banks taking up a more central role in forex markets as the result of reforms aimed at promoting tax collection through the banking system.

She expressed scepticism that private parties could manipulate the exchange rate, which she said was determined by market forces.

“Collusion is unlikely because the profit is very minimal and may not justify the cost of doing so,” she said yesterday, adding that forex rates respond to changes in supply and demand.

However, she said that official NBC exchange rates announced each morning influence the rates posted by moneychangers, though this is only one of many factors.

“This official exchange rate is mostly used for government transactions, while private transactions will rely on market rates determined by banks and moneychangers,” she said.

She added that while the NBC has the authority to intervene in forex markets when necessary, it does not “control” the exchange rate, leaving it to the market to decide.

Seing Lim, general manager of Ly Hour Money Exchange, one of the biggest moneychangers in Cambodia, dismissed the possibility of collusion, claiming that her company’s rates were set according to the total circulation or riel in the market and daily exchange rates posted by the central bank.

The company, which operates 10 branches in the capital, also works closely with moneychangers in the provinces, many of which exchange currency at the company’s branches, Lim said.

“We cannot [collude over rates], it is impossible,” she stated, adding that the market was too big for one or a few moneychangers to control, and the central bank would take firm action against any who try. “We run our money exchange business with professionalism, and we are always fair and faithful in our business,” she added.

Lim Koa Try, owner of Try Im Money Exchange in Phsar Nath in Battambang province, said he sets the company’s daily exchange rates based on the rate supplied by moneychangers in Phnom Penh, and not according to those of the central bank.

“We always follow the exchange rate from the big moneychangers in Phnom Penh,” he said. “I don’t work directly with NBC, so we never follow their rates.”