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Devaluation drives up dollar, gold
Both US dollar and gold prices continued their steady upward creep on the black market for a sixth consecutive day on Feb. 17, following the State Bank of Viet Nam's 9.3-per-cent devaluation of the dong last Friday.
Currency dealers on forex trading streets like Ha Trung and Tran Nhan Tong were trading the dollar at VND22,000, up VND300 over the previous day and VND1,000 from Monday.
This black market price was VND1,000-1,100 per dollar higher than rates quoted at commercial banks, which on Feb. 17 hovered at around VND20,790-20,890. However, this is an improvement over earlier gaps between the commercial and black market rates. Since November, the latter has frequently been about 10 per cent higher than the bank price.
"I don't know what the State really aims to do but since they devalued the dong last week, the dollar has kept going up sharply. My dong are evaporating," said Do Hai, a dealer at a Ha Trung forex shop.
In principle, last week's devaluation was designed to bring the official rate closer to market rate and to narrow the widening trade deficit. State Bank Governor Nguyen Van Giau, immediately after the devaluation, affirmed that commercial banks had plentiful supplies of dollars.
But current happenings on market have been confusing the public, with many people concerned about the weakening dong and trying to seek a safe haven in US dollars as well as in gold.
Major gold dealers in Ha Noi and HCM City, including Sai Gon Jewellery Company, Sacombank Jewellery Company, Bao Tin Minh Chau, Agribank Jewellery Company and Phu Nhuaân Jewellery Company (PNJ), yesterday quoted buy/sell prices of VND36.93-37.07 million (US$1,678-1,685) per tael, up VND250,000 per tael from Wednesday. (One tael is equivalent to 1.2 ounces.)
Gold shops reported that demand for gold leaf in small quantities was increasing quickly. Sacombank and PNJ, for example, reported selling 2,000-6,000 taels of gold leaf per day, up nearly 50 per cent over January's level.
"The response is understandable and predictable after the devaluation. It is obviously natural response by people to protect their assets," a senior official of the Central Institute for Economic Manangement (CIEM) commented to Viet Nam News on Feb. 17 by phone, on condition that his name be withheld.
He suggested that the devaluation would have a positive impact on the economy, but urged the Government to launch a public relations campaign to stabilise public sentiment.
Meanwhile, Agribank Jewellery Company representative Nguyen Huu Dang predicted to Viet Nam News: "The US dollar will hover around this point for the short term, then follow an uptrend in a zigzag fashion, since confidence in the dong has not been fully restored."
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