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Dollar price drops, businesses sigh in relief
The drastic measures taken by the State Bank of Vietnam have brought the desired effects: the dollar fever in the black market has cooled down.
The dollar price has been fluctuating constantly in recent months, making businesses ‘break out in perspiration’. In early 2008, the dollar price hovered around VND16,000-16,200/US$1, while it dropped dramatically to VND15,400/US$1 in March. After that, it unexpectedly soared in June 2008, once hitting the VND19,000/US$1 threshold.
Economists have pointed out that the dollar price increased in the last time because people feared the high inflation rate. The trade deficit reached a record high after five months of the year, making the dollar supply tense. Meanwhile, there was rumour that the government would devaluate the local currency, prompting people to rush to buy and save up dollars.
However, since June 22, 2008, the dollar price has been unexpectedly dropping from the VND19,000/US$1 level on the black market. On July 10-11, the dollar price fell to below VND17,000/US$1. The purchase price on those days was reportedly at VND16,850/US$1, the lowest level in the previous two months, and a 15% decrease from the highest peak.
The sharp fall of the dollar price has made businesses sigh in relief. It is clear that the drastic measures taken by the State Bank of Vietnam have helped cool the market down.
The State Bank of Vietnam pushed up the sale of foreign currencies to commercial banks so that the banks had enough dollars to sell to businesses; it also tightened control over transactions, prohibiting banks from collecting additional fees from clients in foreign currency transactions.
In early July 2008, the Bank for Investment and Development of Vietnam (BIDV) and Techcombank announced they could satisfy any legitimate demand of individuals or businesses for foreign currencies.
Meanwhile, the trade deficit decreased sharply in June, leaving the trade deficit at $14.77bil in the first half of the year, equal to 49.7% of total import turnover, a sharp decrease from 61.5% in the first five months of the year. As a result, the foreign currency demand became less tense.
There is a growing tendency that since June 2008, the exchange rate on the black market has been decreasing, while the rate on the bank-to-businesses market has been increasing, which has been making the exchange rates on the two markets come closer to one another.
Experts say that the dollar supply has become more profuse thanks to the overseas remittance volume. More dollars are being remitted to Vietnam, as investors are advised to invest in stocks and the real estate market. Moreover, the gap between US$ interest rates abroad and in Vietnam has made depositing in Vietnam more attractive.
The US$ interest rate in the US is now 5% per annum on average, while the rate is 8% per annum at the highest.
According to Dong A Bank, $631mil worth of overseas remittance has been transferred through the bank’s system so far this year. Meanwhile, the figure through Sacombank was $420mil.
VNN
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