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Efforts fail to rein in dollar
Ignoring official attempts to stabilise the foreign exchange market, the US dollar yesterday continued to climb in value on the black market to an all-time high of around VND20,720-20,820, while currency dealers in both Ha Noi and HCM City reported changing rates at least six times throughout the day amidst fevered trading.
On the interbank market, a dollar yesterday continued to be traded over VND20,200, although the official rate set by the central bank remained at VND18,932. Commercial banks, meanwhile, were quoting nominal sell prices of VND19,500.
The pressure on the dong was increasing because of growing inflation, the widening trade deficit, slow capital inflows, thin foreign reserves and a large budget deficit, said the deputy head of the Central Institute for Economic Management, Vo Tri Thanh.
Inflation accelerated in October to nearly 10 per cent year on year, while the trade deficit widened to US$1.1 billion in October, from just $395 million in August, according to preliminary figures from the General Statistics Office.
"Excluding speculation, people have a very solid reason to buy gold or foreign currency, that is to preserve their assets," Thanh said.
"If the authorities can improve people's confidence in the dong, the US dollar will fall back," Thanh added.
He argued against further measures by the central bank. "Administrative measures will upset the market and will not bring long-terms benefits when they are ended," Thanh said.
"I'm quite sure that the Vietnamese dong at this stage does not need urther devaluation, and I'm quite sure that the Government, including the central bank, has the same view," Asian Development Bank president Haruhiko Kurdoa told Financial Times, during his visit to Ha Noi this week.
Kurdoa noted that the balance of payments had improved recently and that foreign exchange reserves were increasing, and he was confident that the Vietnamese economy would continue to recover so long as inflationary pressures didn't intensify.
The World Bank also said last month that an unusually large amount of dollars was held outside of Viet Nam's official forex reserves, continuing to pressure the value of the Vietnamese dong.
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