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Exchange rate to stay stable, says bank Governor
The Government of Viet Nam had no plan to adjust the current foreign exchange rate, said State Bank of Viet Nam Governor Nguyen Van Giau.
The central bank had the capacity to balance supply and demand for the US dollar, he said.
Giau was responding to predictions the bank would appreciate the dollar and that the greenback supply was low. Neither of which was correct, he said.
His public statement followed an unusual and sudden appreciation of the currency against the Vietnamese dong on the black market since last week, in contrast to a stable dollar on the banking market.
The central bank listed the inter-bank rate market at around VND16,973 per dollar, while a dollar cost around VND17,482 at commercial banks.
In contrast to reports in the local media which said banks were thirsty for the dollar and did not have enough dollars to sell, many bank leaders said they would definitely be able to meet the demand for US dollars from enterprises and individual customers who needed capital to manufacture, import or do business.
Vietcombank General Director Nguyen Phuoc Thanh said the bank's dollar transactions were normal.
ACB Bank Deputy General Director Nguyen Thanh Toai also said the demand for the US dollar was being adequately met by his institution. He said purchasing power in the domestic market was not growing and demand from enterprises to pay for imports remained limited.
Expensive bucks
This was in stark contrast to the message from the street where late last week a single dollar cost as much as VND18,000.
Gold shops on Ha Trung and Tran Nhan Tong streets and some other shops across Ha Noi bought a single dollar at VND17,750-17,800 and sold at VND17,950-18,000.
And since early this week, a steady stream of investors and speculators has flowed into gold shops to buy the US dollar, which, in some cases, is reported to have led to a short supply. Yesterday, a dollar cost VND17,680-17,720, up 0.45 per cent against Tuesday or up VND80 per dollar on the parallel market.
Yesterday, in the non-deliverable-forward (NDF) market - where investors anticipate the value of currencies - the monthly cost of the dollar was expected to rise to VND18,365 within three months, up VND865 against late last year or up VND65 against last Friday.
The dollar is expected to cost VND19,165 within six months and VND20,065 by February 2010.
Scouring hot spots in the black market in Ha Noi, the Viet Nam News found many people were buying the dollar as speculation.
"I only sell the dollar to familiar customers," said the owner of a shop on Tran Nhan Tong St. "I'm sure most of them are speculators. They always come here when the US dollar fluctuates and they trade in big volumes."
A customer at a gold shop in Hang Manh Street supported this view.
"You know, many financial and monetary forums on the internet have been talking for days about an appreciation of the US dollar against the dong in near future," he said. "I find their analysis reasonable and they said foreigners also believed that."
Across several other public forums, people believed the Government decision, announced nearly two weeks ago, to issue bonds denominated in the dollar to fund key national projects and help offset the budget deficit, had added to the dollar's popularity.
There was a general consensus that policy makers would allow the depreciation of the domestic currency to make the bonds more attractive.
The Harvard Kennedy School of Government Report, released to the public early this month, and some international banks have recommended a further, orderly depreciation of the dong this year to boost exports and narrow the trade deficit.
The reports explained that a small economy with a fixed foreign exchange rate and big trade deficit had limited choices and that devaluing the dong and restructuring public investment were the best policies.
Also, gold traders who previously sold to take advantage of the high international price for the precious metal, were reportedly turning their dong into dollars because bank interest was not as attractive as several months ago.
Moreover, it was believed the interest paid for dong deposits would fall further as inflation in Asia, including Viet Nam, would allow the central bank to again reduce the interest rate, which also promotes the dollar.
It followed that as Asian stocks slid and insolvent banks faced the prospect of public ownership, investors would choose the safety of the dollar, US Treasury bonds and gold.
All of these reasons are underpinning speculation on the black market.
However, bankers and economists recommend people should not store foreign currency in order to stop speculative business which will hurt many enterprises and individuals in the economy.
VietNamNet, Viet Nam News
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