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US$ exceeds VND 18,000/US $1.00 threshold
As forecasted before, the VND/US$ exchange rate on the black market exceeded the VND 18,000/US $1.00 threshold on the weekend of April 12.
By late afternoon of April 12, the US$ transactions had been staying firm at VND 18,000/US $1.00 (purchase) and VND 18,030/US $1.00 (sale). As such, after two days the dollar price increased sharply by VND 70/US $1.00 (both sale and purchase prices).
In general, the VND/US $1.00 exchange rate increased by VND 170/US $1.00, or 17 times higher than the increase of the previous week. Despite the sharp dollar price increases, the transactions on the black market remained modest in terms of quantity.
This has been attributed to the fact that people expect the dollar price to increase further in the time to come, which prompts them not to make transactions at this moment. Meanwhile, no one wants to sell dollars now as they want to keep dollars in anticipation of the exchange rate fluctuations.
Meanwhile, the VND/US$ exchange rate on the interbank market has been lowered continuously. The exchange rates announced by the State Bank of Vietnam for April 11 were VND 16,938/US $1.00, down by VND 2/US $1.00 over the transaction day in early previous week. The State Bank of Vietnam reported that the VND/US$ sale exchange rates quoted by commercial banks last week hovered around VND 17,785-17,790/US$1, while the purchase rate was between VND 17,720-17,770/US $1.00.
As such, the exchange rate performance in the official market proves to be quite contradictory to the one in the black market: while it keeps going down in the former, it has been going up in the latter.
In the world’s market, the greenback has been devaluating against other hard foreign currencies, especially the euro. According to the State Bank of Vietnam in March alone, the greenback lost 7.8% of its value against the euro.
However, the greenback price increase in the black market proves to come contrary to the interest rate tendency.
Quick reports by commercial banks showed that the VND interest rates on the interbank market tend to increase in all terms, except the unchanged three-month term loans. The highest interest rate increase was 2.5% per annum for 12 month term loans.
Meanwhile, the US$ interest rates tend to decrease in all terms of loans. The highest interest rate now is 2.13% per annum for 3 month term loans, while the rates of other terms are hovering around 0.4%-1.2%.
In theory, as the gold and stock markets are warming up, people will sell dollars to make investments in stocks, thus leading to less attractiveness of the dollar and the devaluation of the currency.
However, the dollar price keeps increasing in the black market, which has been explained by the fact that businessmen are collecting dollars to import gold, once the domestic price is still higher by VND 60,000/tael than the world’s price.
Meanwhile, Bui Kien Thanh, Senior Advisor to KHM Inc, General Director of IAMC, said that the dollar price increase in the last time was the result of the pressure on devaluating the VND which appeared last year.
The expert said that the action by the State Bank of Vietnam to lower the interbank exchange rate cannot reassure the market. Businesses nowadays also do not want US dollar loans for fear of the exchange rate fluctuations.
VietNamNet, DTCK
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