VIETNAM - Central bank adjusts exchange rate once more, but market keeps stable

by lexie Fri Dec 16, 2011 12:04 pm

December 16, 2011

Central bank adjusts exchange rate once more, but market keeps stable

The State Bank of Vietnam on December 14 unexpected devaluated the dong by another 0.05 percent after the 40-day period of keeping the dong value unchanged. However, people still keep calm with the move.

As such, the dong has lost 0.9 percent of its value since September 7, 2011, when the State Bank made the commitment not to devaluate the dong by more than one percent until the end of the year.

The latest adjustment of the dong/dollar exchange rate is not big, and the dong devaluation level is still within reach. However, the move by the State Bank has also caught the attention from the public because it roused the long lasting quietness.

Right after the new official exchange rate was announced, commercial banks have quoted new dollar prices with the sale prices having been pushed up to the new ceiling levels of 21,021 dong per dollar. Meanwhile, the Bank for Investment and Development of Vietnam BIDV and Eximbank have both raised the buy price to 21,000 dong per dollar.

Especially, according to Tien phong newspaper, Vietcombank at 12 pm of December 14 quoted the buy price at 21,015 dong per dollar and sale price at 21,019 dong per dollar. The move immediately drew the attention from the public because for the first time, a commercial bank quoted the price lower than the allowed ceiling level. Meanwhile, the gap between the sale and the purchase prices has been narrowed to four dong per dollar, which is equal to that in October 2011.

Since mid November to December 13, the gap between the sale and buy prices applied by Vietcombank stayed at 6 dong per dollar, the lowest gap among the ones applied by big banks. The gaps of BIDV and Eximbank were 21 dong per dollar on average.

The stabilization of the dong/dollar exchange rate and the cooling gold market are both considered the big successes of the State Bank in its effort to stabilize the market. The latest move of raising the dollar price by another 10 dong is believed to be a reaction to the higher dollar demand in the last months of the year.

The pressure on the dong/dollar exchange rate is believed to be not too hard in the last months of the year thanks to the profuse kieu hoi, or overseas remittance from overseas Vietnamese people, and the sharp falls of the trade gap in November.

According to the World Bank, the kieu hoi volume to be remitted to Vietnam this year may reach 9 billion dollars this year, which would lead to the surplus of three billion dollars in the general payment balance.

The government’s website has quoted sources as saying that the trade gap decreases by 2.6 billion dollars this year. The foreign direct investment capital reaches 11 billion dollars, while the disbursed capital of ODA (official development assistance) is estimated to reach 3.65 billion dollars. Besides, Vietnam can earn 5.2 billion dollars from foreign travelers.

According to Nguoi lao dong, the dollar price on the black market on December 14 was 21,160 dong (buy price) and 21,220 dong per dollar (sale). As such, the black market price was only 145 dong per dollar higher than the price quoted by commercial banks.

The State Bank of Vietnam has been tightening its control over foreign currency transactions, which also can explain why the dollar market has been stabilized.

A lot of gold shops in HCM City now dare not collect dollars from the public. The owner of a gold shop on Ba Chieu Market area in Binh Thanh district of HCM City said that all gold shop owners have to make commitments not to trade foreign currencies. Those, who break the commitments, will be imposed the fine of up to hundreds of millions of dong.

http://www.vietfinancenews.com/2011/12/central-bank-adjusts-exchange-rate-once.html#more