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State Bank moves to cool demand for US dollars
The State Bank of Viet Nam plans to inject addtional US dollars into the commercial banking system to meet the growing hunger of importers for the greenback in the closing months of the year, when consumer demand for imported goods traditionally rises.
The State Bank was unable yesterday to disclose the exact date or volume of the planned dollar infusion. However, a bank source that asked to remain anonymous said that commercial banks would be required to demonstrate a real demand for dollars by enterprises.
The World Bank on Tuesday said that an unusually large amount of money held outside of Viet Nam's official foreign exchange reserves was continuing to pressure the value of the Vietnamese dong even as most other regional currencies strengthened.
Viet Nam has devalued the dong by over 11 per cent since last November in a move intended to help control the ballooning trade deficit. But other regional currencies, according to the World Bank's latest East Asia and Pacific Economic Update, were actually 10-15 per cent stronger against the dollar than before the 2008 global financial crisis.
World Bank economist Deepak Mishra assumed that Viet Nam had enough dollar inflows to cover current accounts, but the real issue was the amount of foreign currency held in forms not under the control of the State Bank of Viet Nam, such as savings.
He estimated that this could be as high as 12 per cent of gross domestic product (GDP), putting intense pressures on the exchange rate and making the dong seem overvalued.
Consistent with this position, the State Bank this week has denied any further plans to devalue the local currency.
Nevertheless, the dollar continued to become more expensive on the black market yesterday, inching up another VND200 from Tuesday's level to an average of VND20,220 per dollar. By the afternoon, however, this had eased back to VND20,170 per dollar.
"Because the dollar is dancing, we don't dare hold too many dollars, in order to avoid exchange rate risks," said a forex retailer on Ha Noi's Ha Trung Street. "When customers want to buy, we will call major FX dealers to take the dollar."
On the interbank market, one dollar continued to be traded at VND19,970-19,980, although the official rate set by the central bank remained at VND18,932 per dollar. Commercial banks, meanwhile, were quoting nominal sell prices of VND19,500.
On the non-deliverable forward (NDF) market – a currency futures market – the US dollar yesterday was expected to keep rising, hitting over VND19,990 by next month, VND20,320 in three months, nearly VND20,790 in six months, and VND21,560 by October of next year.
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