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Dong likely to go up from 2012, says banker
The dong is likely to strengthen from 2012, the incoming CEO of Standard Chartered Bank in Vietnam, Laos, and Cambodia told Thoi Bao Kinh Te Sai Gon (Saigon Economic Times) newspaper last week.
The exchange rate on the unofficial market surged to VND21,450 a dollar Monday from VND21,300 last week.
Louis Taylor forecast the fall in the dong’s value to slow down next year, staying at around VND20,800 to the dollar by year-end.
However, with Vietnam’s rapid economic growth likely to bring back foreign investors, the dong will strengthen from 2012, he said.
Asked about the dong’s weakness against the greenback, he said countries consistently suffering trade deficits see their currencies depreciate.
Though Vietnam’s trade deficit has been offset by foreign investment and remittances, the dong is expected to stay flat or even fall further in the next year since the country is in the middle of building its infrastructure, he said.
This is the key factor for the pressure on the country’s currency along with expectations of high inflation, he explained.
Regarding the State Bank of Vietnam’s measures to stabilize the currency, he said the central bank has made a big effort to alter interest rates to reflect market conditions, which is a key policy in easing pressure on the currency.
The SBV is also trying to discourage hoarding of dollars and gold, and if the central bank succeeds in reducing public expectations of a weaker currency and higher inflation, the dong is likely to be stable, he said.
He approved of the monetary tightening, saying the massive interest rate hikes are among the SBV’s measures to ensure a safe and healthy banking system.
Its move to raise key interest rates will partly help stabilize exchange rates and tackle inflation, he said.
The rate hikes by the SBV also partially addresses the exchange rate issue - low interest rates make it cheap for people to buy and hold on to the dollar, thus undermining the dong – he added.
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