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High demand for dollar to end soon: Bankers
Bankers said the surge in demand for the dollar is temporary and is caused by companies trying to buy the greenback using their newly granted loans.
They said the government’s subsidy program is only for dong loans, and many companies, therefore, have to buy dollars to pay for imports.
Commercial banks have lent a combined VND80 trillion (US$4.6 billion) to businesses in the three weeks since the government launched the program to subsidize loan interest by 4 percent.
Nguyen Phuoc Thanh, chief executive of the Joint-Stock Commercial Bank for Foreign Trade of Vietnam, or Vietcombank, said the demand for the dollar is only temporary.
The priority for his bank right now is to ensure enough foreign currency for businesses in the production and foreign trade sectors.
“Market rumors about the dollar’s appreciation and shortage are inaccurate,” Governor Nguyen Van Giau said in a report published on the State Bank of Vietnam’s website Wednesday.
There is still a balance between supply and demand in the market, he told Thanh Nien Friday, noting the government has no plan to adjust the exchange rate.
Giau said in early February forex reserves stood at $22 billion, slightly up from $21.9 billion estimated last October.
The dong Friday traded at 17,479.50 per dollar in the interbank market in Hanoi, compared with 17,482 Friday, according to data compiled by Bloomberg.
Interbank trade in dollar/dong is only permitted within a band of 3 percent on either side of a mid-point set daily by the central bank, but the band is widely ignored in the country’s gold shops which double as currency dealers and handle huge sums of money every day.
The exchange rate at money changers’ in Hanoi and Ho Chi Minh City Friday was about 17,650. Last week the rate nearly hit 18,000.
Cao Sy Kiem, a former central bank governor, said the forex rate on the unofficial market has been driven up mainly by psychological buying.
Citigroup forecast in January the dong would depreciate to 17,948 per dollar by the end of 2009 – around 2.6 percent below the current interbank rate of 17,484 – due to a decline in exports, tighter foreign direct investment and lower remittances from Vietnamese abroad.
Last year, the dong declined around 8 percent against the dollar.
Asian currencies
Analysts said the dong has gained 5-7 percent against other Asian currencies.
Currencies around the region fell this month, with South Korea’s won slumping toward an 11-year low and the Indian rupee dropping to a record, on concern sliding exports and shrinking economies will deter foreign investment.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, touched the lowest level in three years as overseas investors cut holdings of emerging-market assets.
“The degree of downturn in Asian economies has been surprisingly substantial,” said Tomo Kinoshita, an economist at Nomura Holdings Inc. in Hong Kong. “That has probably upset the investors of equity and fixed income, which certainly helped to depreciate the currencies.”
Eight of the 10 most-active Asian currencies dropped against the dollar this month as investors favored safer bets than emerging markets.
TN, Agencies
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