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Foreign exchange supply sufficient, rates to be stable
Vietnam has enough foreign currency and the central bank will not need to adjust the exchange rate, according to the prime minister, but some said banks were struggling to satisfy their U.S. dollar needs.
"The six-month trade deficit only stood at $2.1 billion, while crude oil prices are trending higher ... The economy is not short of foreign exchange," Prime Minister Nguyen Tan Dung said in a speech published by the central bank's Vietnam Banking Times newspaper on Monday.
"Therefore, it is not necessary to adjust the exchange rate," Dung told central bank and government officials last Friday.
Dung said a drop in exports in the first six months of this year of 10 percent from the same period last year was due to lower export prices, and volume was still on the rise.
Dung's comments had little impact on the money market, with the dollar/dong at the ceiling rate due to what dealers said was scant dollar supply, while dong lending rates on the interbank market eased slightly.
"Banks are still not able to buy dollars as much as they need," a dealer at a foreign bank in Ho Chi Minh City said. Another dealer in Hanoi said interbank dollar/dong trade was slow: "Maybe banks have no supply sources."
Dung said the central bank needed to keep credit and money supply growth in line with economic growth and inflation targets.
Deputy Finance Minister Tran Xuan Ha said at the meeting that loans at the end of June had risen 17 percent from the end of 2008, in line with deposit growth of 16.2 percent in the period.
The central bank has raised the target for credit growth this year to 30 percent from an initial projection of 21-23 percent.
The State Bank of Vietnam said it planned to keep key interest rates for the dong stable in the second half of 2009, after annual inflation this month sank to its lowest level in more than five years.
Ha also said currency supply and demand was relatively stable, with first-half disbursement of official development assistance reaching half of the annual plan.
The annual balance of payments is forecast to hit a deficit of only $1.5 billion. Therefore, the foreign exchange policy needs to be stable and the existing trading band is reasonable, Ha was quoted by the banking newspaper as saying.
The central bank has kept the dollar/dong trading band unchanged since March 24, when it widened the band to 5 percent from 3 percent either side of a fixed daily midpoint.
vietnews, Reuters
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