The National Bank of Cambodia (NBC) in the capital’s Sen Sok district. POST STAFF
The National Bank of Cambodia (NBC) has scheduled four foreign exchange auctions this September to infuse a total of $50 million into the market. The move comes at a critical time, with experts viewing it as a significant step towards stabilising the Cambodian riel against the US dollar.
The NBC issued a formal notice to all licensed banks, financial institutions and currency exchange businesses in the country on September 4, urging them to prepare for the series of US dollar bids slated to take place on specific dates this month.
According to the notice, the auctions are structured as follows: a $10 million bid on September 6, a $15 million bid on September 8, another $10 million on September 13 and concluding with a $15 million bid on September 15.
The central bank did not provide explicit reasons for initiating these auctions. However, the move follows a period of several months during which the riel has been depreciating in relation to the dollar.
“The NBC’s decision to auction dollars is likely intended to absorb surplus riel in circulation and thereby uphold the riel’s exchange rate,” said In Channy, president of public-listed ACLEDA Bank.
Channy said the practice of foreign exchange auctions is not new to the Kingdom, noting that the country has been resorting to such mechanisms since the 1960s to maintain currency stability.
“In 2021, we had more than 10 such auctions, but none were necessary in 2022 due to the riel’s robust solidity,” he added.
Meanwhile, some banking institutions have indicated that they will not be participating in the upcoming auctions.
Huot Eang Tong, director-general of Hattha Kaksekar Bank, mentioned that his bank currently has a greater demand for riel than for dollar.
“At this juncture, the riel-dollar exchange rate does not pose a significant risk,” he said.
“However, should the dollar continue to gain strength, it could jeopardise overseas investments,” he cautioned.
Late in August, the NBC intervened in the currency market in response to slower demand for riel and appreciation of the US dollar in the international foreign exchange market. It pointed out that seasonal factors, such as harvests and tourism lows, have also contributed to reduced demand for the riel.
The central bank’s notice also mentioned that it is prepared to employ various tools of monetary policy, including further market interventions, to sustain the riel’s value.
“Such steps are integral to maintaining the purchasing power of the people,” it read.
Rath Sophoan, vice-president of the Association of Banks in Cambodia (ABC), agreed with the central bank’s timely action.
“The NBC is right in aiming to maintain the riel’s value, especially when the dollar is showing signs of strengthening. This could otherwise be a complex issue,” he said, noting that the current exchange rates are not causing any immediate concerns.
