Possible Govt., action’s terror set Hanoi's black money market on verge

Hanoi's foreign exchange black market has put on vigilant because of government’s possible action against inflation and a frail currency.

Few of the city's gold shops which are involved in the business of money changing had stopped dealing dollars due to the horror of action. The government likes to set a limit of black market currency trading bringing the value of the “dong” nearer to official exchange rates.

To curb the black market dealing the central bank has also raised the interest rates, which the third time enhancement in interest rate since mid-February. The bank has picked up its refinance and discount rates to 12%.

According to Financial Times, most of the Hanoi gold traders said they had ended up buying and selling of dollars. They also said the government had guaranteed to penalize “collector and investor” and were concerned about how that would be imposed. The gold shops told that they had stopped bought or sold dollars for three days.

Usually when the value of dong is decreased in Vietnam, the investors want protection in other benefits such as gold and the US dollar. As well as the government taking action over currency trading, has also been adopting other measures to slow down inflation. On the devaluing the dong in pervious month, it was taken a step to make tight the country's monetary policy.

From the last couple of years the Vietnamese government and central bank have maintained interest rates lower and sponsored loan in respect of enhance improvement. Consequently the inflation has touched its highest position at 12.3% in February.

Experts say rate rising were a cheering move, but confusing. Mark Hildebrandt of JP Morgan Chase Bank wrote in a message to the customer, "The market was not expecting a choice, nor has any justification been given," Mark Hildebrandt of JP Morgan Chase Bank wrote in a note to clients. He added more lucidity was required.

Mr. Hildebrandt said, development in increasing its policy structure and speaking its conclusion and basis to the market would go a lengthy way to boosting market confidence.