Vietnam: Dong/dollar exchange rate stable, businesses feel easier

by **ADMIN** Tue Dec 13, 2011 10:35 am

Dong/dollar exchange rate stable, businesses feel easier

The current performance of the foreign currency market shows that the State bank of Vietnam is trying everything it can so as to fulfill its commitment not to adjust the dong/dollar exchange rate by more than one percent until the end of the year.

Several months ago, the State Bank of Vietnam reassured the public when announcing that the dong would not lose more than one percent of its value by the end of the year. After 14 times of adjusting the exchange rate, the dong had lost 0.85 percent of its value by October 2011.

The dong/dollar exchange rate has been stable over the last month. VIetcombank, the biggest foreign currency trader, quotes the dollar prices at 21,005-21,011 dong per dollar. Meanwhile, the exchange rates quoted by others banks are lower. ACB and Sacombank, for example, quote the prices lower by 15-25 dong per dollar lower than that of Vietcombank.

Other banks also quote the dollar prices at the ceiling levels, but the bankers all say that there is no hard pressure on the dollar supply, even though the demand for dollar is high in the last months of the year, when businesses rush to import goods for the year-end and Tet sale seasons.

When asked why the dong/dollar exchange rate has been stable over the last month, general director of a bank said that in the last two or three weeks, some banks have pushed up the selling of dollars in order to improve their dong liquidity. Moreover, banks now do not seriously lack dollars any more, because they can “take a roundabout” to seek capital in dollars.

The director has revealed that his bank has pushed up the mobilization of capital in non-dollar currencies by offering higher deposit interest rates (the State Bank does not set any caps on non-dollar deposit interest rates). After that, they convert the foreign currencies mobilized into dollars through the international market which they would lend to clients to serve the increasingly high demand at the end of the year.

Analysts have pointed out that the stabilized gold market has also helped stabilize the dollar market. The State Bank of Vietnam has kept a tightened the control over the gold market and made strong intervention when necessary, which has helped narrow the gap between the domestic and the world’s prices.

Since the gap has been narrowed, which makes the gold imports unprofitable; speculators do not try to collect dollars on the black market to import gold any more. As the demand for foreign currency is not too high, the dollar market has become more stable.

The above said director has also said that the State Bank has discovered some illegal dollar trading deals. Therefore, the black market has become quiet because buyers and sellers dare not make transactions at this moment.

According to the Ministry of Planning and Investment MPI, the imports and exports have helped stabilize the dong/dollar exchange rate. Vietnam expects to obtain the record import-export turnover of 202 billion dollars this year, which is equal to 170 percent of GDP. Of this, the export turnover is expected to reach 96 billion dollars, an increase of 33 percent over 2010, and the import turnover is 106 billion dollars, up by 25 percent.

Especially, the trade gap has decreased significantly, expected to stay at 10 billion dollars, equal to 10.5 percent of total export turnover. It is expected that the general balance would see the surplus of up to 3.1 billion dollars. The figure, if turning realistic, demonstrates a considerable improvement in the import and export, if noting that the general balance saw the deficit of 8.8 billion dollars in 2009 and 3.07 billion dollars in 2010.

http://vietnambusiness.asia/dongdollar-exchange-rate-stable-businesses-feel-easier/