|
Forex market to slow after ban on trading outside band
Dollar trading by commercial banks could grind to a halt following a central bank decision to prevent them from trading outside the forex band, bankers said.
“Most partly private banks have bought foreign currencies at rates outside the trading band and now they do not want to sell the currencies at official rates,” Nguyen Tuan Anh, foreign currency manager at ANZ’s Ho Chi Minh City branch, told a conference on Thursday.
“I think the foreign currency market is going to freeze for a short time,” he said.
The State Bank of Vietnam said Wednesday that commercial banks cannot use derivatives to trade dollars at rates outside the official trading band, warning offenders would be punished.
Last June the central bank banned the use of third currencies to circumvent a trading band running 3 percent on either side of a midpoint it sets each day.
Friday the regulator set the reference rate for dong trading at 16,981 dong per dollar compared with 16,978 on Thursday.
But bankers say that in practice some traders have been using a range of methods, including currency options and third currencies, to trade dollar/dong outside the band, at rates that many see as more market-oriented.
Nguyen Quoc Sy, deputy general director of Western Bank in Can Tho City, said the strict monitoring of foreign currency trading would make it more difficult for companies to buy the greenback to pay for imports.
It is likely that many importers would be unable to meet their payment deadlines, Sy said.
Exporters, meanwhile, do not want to sell their dollar reserves to banks at official rates, said a bank manager, who wished to be unnamed.
ANZ’s Anh said he expected the central bank to widen the trading band to make it more flexible for commercial banks in setting forex rates. The trading band was widened in November to 3 percent from 2 percent.
Anh said there is speculation that the band would be widened to 5 percent. It is now very difficult for importers to buy the greenback since banks are waiting for a wider trading band, he added.
The dong traded at 17,488.50 to the dollar as of 3:21 p.m. in Hanoi, compared with 17,487 on Thursday, according to data compiled by Bloomberg. It reached an all-time low of 17,492 on December 29.
On the black market it traded at VND17,670/17,710, according to telephone directory information service 1080.
Economists widely expect the dong to lose value this year, though Prime Minister Nguyen Tan Dung has ruled out a devaluation. Last year, the dong fell around 9 percent against the dollar.
ANZ’s Anh forecast the dong could only be kept stable until mid-year. His bank last week forecast the local currency would fall to as low as 18,500 per dollar by the end of the year due to a drain on foreign exchange reserves.
Vietnam is facing a resurfacing of depreciation pressures on its currency, even after a 3 percent devaluation of the dong in December, according to the IMF.
“The dong appears somewhat overvalued compared with its estimated medium-term equilibrium level, although the precise degree of the deviation is difficult to ascertain,” it said.
Central bank governor Nguyen Van Giau said in early February that foreign reserves stood at US$22 billion, slightly up from an estimated $21.9 billion in October. The balance of payments position has also improved markedly since last year.
ThanhNien, Vietnamplus
|
