US Dollar Drops Below 4,000 Riel with Agricultural Harvest

23 March 2012 | Posted in News

An increase in agricultural trading has caused the value of the US dollar to dip below 4,000 riel in the past three consecutive days, as there is now a higher demand for the Cambodian riel, money exchangers and an official from the National Bank of Cambodia said yesterday.

Nguon Sokha, director-general of the National Bank of Cambodia, said that the high demand for riel is seasonal, and often comes at the same time as farmers and agricultural traders flood into the city to trade their products.

She also rejected that external impacts, such as the current weakening of the US dollar or the European sovereign debt crisis, were the cause for the dip.

“[The drop] is actually due to the outcome from the agricultural sector. This is the time when farmers are selling their produce, so they have to trade in riel,” said Ms. Sokha, adding that the value should return to normal, which is above 4,000 riel, after the Khmer New Year in mid-April.

“If it goes to 3,800 [riel], then it is quite low. Normally, the fluctuation is between 3,900 to 4,100 [riel],” she said. “We will not intervene unless if something drastic happens… Right now, we think it is stable.” A survey yesterday of the money exchangers located around Phnom Penh’s central market showed the dollar being sold at 3,997 riel.

A manager at Ly Hour Money Exchange, who declined to be named, said that this dip is normal. “It fluctuates only during harvest season, starting from December until the end of March,” she said.

Taing Rada, a money exchanger, said there has been an increase of people coming from the provinces to trade rice, corn and cassava, which requires the Cambodian riel. He anticipated the dollar value to drop to 3,900 riel.

“[The drop] will affect farmers and factory workers,” said Mr. Rada. “They will find it hard to buy things and food because while the dollar drops, the [price of] goods on the market do not drop.”

Kang Chandararoth, director and head of the economics unit at the Cambodia Institute of Development Study, cautioned that because Cambodia has so many imported goods, a continued lull in the dollar’s value would cause an increase in prices of imported products, which would lead to inflation.

“It could be seasonal… but I think it’s still very risky for [the] Cambodian market economy. We should be very cautious not to let the dollar weaken because that can cause inflation,” said Mr. Chandararoth.