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Government pronouncement brings trust back in dong
After the government said recently that economic stability is its main goal, the frenzy for the dollar as a safe haven has eased.
Since February 23, a day after the government passed a resolution to stabilize the economy, the US dollar has been depreciating on the black market.
By last Friday it had fallen to below VND21,800, a drop of more than VND700 from the previous week.
However, jewelry shops have been reluctant to buy dollars despite a record difference of VND150-200 between selling and buying prices.
A sell-off
Since the passage of the resolution, people have been mostly selling the greenback. Bich Ngoc, a resident of Ho Chi Minh City’s District 1, who sold US$3,000 to a moneychanger on Dong Khoi Street, District 1, said: “I bought dollars for VND21,900 and now sold them for VND21,700. It’s a big loss. But I fear it will further fall.”
The owner of K.D. Jewelry Shop on Nguyen Thai Binh Street in Tan Binh District said the dollar is tumbling fast because people are selling it. “Buyers have widened the buy-sell gap but still suffer a loss the next day,” he said, adding he dare not buy dollars in large quantities and bought only from regular customers.
Many people who were unable to sell their dollars have chosen to deposit them in banks.
Nguyen Thi Thuy, a customer of the HCM City-based Asia Commercial Bank’s head office branch, said: “I withdrew dollars from the bank to sell but many places refuse to buy. It is already a loss. So I have deposited [the money] in the bank to enjoy an interest rate of VND4.35 percent.”
Where to invest?
Many people have sold dollars but do not know what asset class to invest in next. Hoang Van Nguyen of Thu Duc District, who sold $7,000, said: “I am afraid the dollar will depreciate but I am also afraid of buying gold.”
Last week he opened a savings account in a bank.
“I heard many people say the actual interest rate now is 17.18 (17-18?) percent. So I deposited the money in a bank before making a decision.”
Pham Thi Thuy Duong withdrew her money from the Vietnam Technological and Commercial Joint Stock Bank (Techcombank) to deposit in another bank to get a higher interest rate of 18-19 percent and receive gold as a gift. “Since we don’t know where to invest, we deposit in banks.”
Many banks are struggling with a liquidity crunch and are offering 17-18 percent interest though the State Bank of Vietnam has set a ceiling of 14 percent and warned banks not to breach it.
One bank offers gold for deposits of more than VND200 million ($9,500) and an interest rate of 16.5 percent.
The branch director of a large joint stock bank on Cach Mang Thang Tam Street, District 3, lamented: “Without raising the interest rate, it is impossible to keep clients. Prices are rising fast and not hiking the interest rate will cause a cash crunch for banks.”
tuoitrenews, Vietnam Economic Forum
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