|
Dong slips 1.4 percent, most in 3 months, on new band
The dong fell the most in three months after the central bank widened the currency’s trading band for the first time since November, seeking a weaker currency to boost exports.
The dong slipped 1.4 percent Tuesday, the biggest drop since December 25, to VND17,729 a dollar as of 4:30 p.m. in Hanoi, according to prices from banks compiled by Bloomberg. The State Bank of Vietnam left its reference rate unchanged at VND16,980.
The central bank said Monday the currency can trade up to 5 percent on either side of that fixed rate from Tuesday, compared with 3 percent previously. The government is trying to bolster exports after the economy expanded 6.2 percent last year, the slowest pace since 1999.
Fresh data showing inflation continued to moderate in March will give the State Bank of Vietnam more room to spur growth, even as slumping global demand weighs on trade, analysts said.
“From a policy perspective, supporting growth is the main objective for now, and here a softening inflation trajectory provides a favorable backdrop,” HSBC economist Prakriti Sofat wrote in a note after the data was released on Tuesday.
“We are looking for the authorities to weaken the currency by at least 6 percent this year,” said Nicholas Bibby, an economist at Barclays Plc. in Singapore. “Concern about inflation has dissipated and will trend lower. Economic growth has slowed and so have exports. A weaker currency may help to temper this.”
Consumer prices rose 11.3 percent from a year earlier this month after gaining 14.8 percent in February, according to figures released Tuesday by the General Statistics Office in Hanoi. On a monthly basis, prices fell 0.2 percent from February.
The World Bank last week forecast Vietnam’s gross domestic product would increase 5.5 percent this year and the International Monetary Fund predicted 4.8 percent growth.
Market rate
The widening of the dong’s trading band would allow “exchange rates that are closer to supply and demand,” the State Bank of Vietnam Governor Nguyen Van Giau said in a statement posted on the central bank’s website Monday. The regulator on December 25 devalued the dong 3 percent by fixing its reference rate weaker.
The currency’s exchange rate at money changers in Hanoi Tuesday surged to as high as VND18,000 per dollar from VND17,680 on Monday, according to telephone directory information service 1080.
The central bank will “continue moving to a more flexible exchange rate regime,” Tetsuji Sano, a Singapore-based economist at Nomura Holdings Inc., wrote Tuesday in a research note. “The next move may be to lower the central reference rate in line with market transactions by the end of the second quarter.”
Bonds fall
Benchmark five-year government bonds Tuesday dropped the most this year on concern a slide in the local currency will diminish the appeal of the securities.
The yield on the five-year note surged 0.25 percent, the most since December 30, to 9.47 percent, the highest level since January 9, according to daily fixing prices from about 10 banks compiled by Bloomberg.
“Foreign investors will increase sales of dong-denominated bonds since the currency is expected to drop more on the central bank’s move,” said Le Duc Tho, head of the investment department at Hanoi-based Vietnam Bank for Industry and Trade, or Vietinbank, the country’s fourth-biggest bank. “Overseas investors wouldn’t want to keep fixed-income assets which are losing their value.”
The State Treasury Tuesday sold US$80 million of two-year dollar bonds locally, less than the $100 million it planned to raise, Hanoi Securities Trading Center said.
The bonds were sold with a coupon of 3.2 percent, the center said at the end of the auction. The highest rate sought by the sale’s 13 bidders was 6 percent, while the lowest was 1.95 percent. Bids totaled $494 million, the exchange said.
“The 3.2 percent interest is very low and not enough for banks to cover their cost of raising two-year funds,” Vietinbank’s Tho said.
The bonds would be issued on March 26, Hanoi Securities Trading Center said last week. The State Treasury sold $100 million worth of one-year dollar bonds on March 20 with a coupon of 3 percent and plans to auction $100 million worth of three-year notes on March 27.
“We would expect the government to raise interest rates at the next dollar-bond auction if they want to sell all the bonds on offer,” Tho said.
Bloomberg, Reuters, thanhnien
|
