Vietnam Dong Slips to Record Low as Central Bank Weakens Rate

by lexie Fri Oct 28, 2011 1:53 pm

October 28, 2011

Vietnam Dong Slips to Record Low as Central Bank Weakens Rate

Vietnam’s dong closed below 21,000 per dollar for the first time as the central bank set the currency’s reference rate at the weakest level since at least 2005. Government bonds were steady.

The State Bank of Vietnam set the daily reference rate at 20,803, compared with 20,788 yesterday, according to its website. The currency can trade up to 1 percent on either side of the fixing. The dong has weakened due to “complicated” movements in the local gold market and the foreign-exchange market “has not stabilized yet,” the central bank said in an Oct. 24 report posted on its website.

The dong fell 0.1 percent today and this week to 21,009 per dollar as of 4 p.m. in Hanoi, according to prices from banks compiled by Bloomberg. It was the currency’s weakest level since June 1993.

Government bonds were steady. The State Treasury sold 300 billion dong ($14.3 million) of five-year bonds at 12.15 percent and 700 billion dong of three-year notes at 12.10 percent at an auction yesterday, according to a statement posted on the Hanoi Stock Exchange’s website, where the sale took place. Both rates were unchanged from the previous two auctions held on Oct. 6 and Sept. 29. The treasury had offered 1 trillion dong each of the notes.

The yield on the five-year notes fell one basis point, or 0.01 percentage point, to 12.44 percent, according to a daily fixing price from banks compiled by Bloomberg. The yield rose two basis points this week.

“Bond yields in the secondary market will be hovering over these levels for a while unless the government changes the rates at auctions,” said Nguyen Tien Hai, the Hanoi-based head of fixed-income at Bao Viet Fund Management Co., a unit of Vietnam’s biggest insurer. “Demand for bonds is quite low.” (Bloomberg)

http://www.vietfinancenews.com/2011/10/vietnam-dong-slips-to-record-low-as.html