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Currency rates to spike in late 2011
Financial experts have warned the dong-dollar exchange rate may hike in late 2011 on the back of soaring local demand.
The dong-dollar exchange rate in the unofficial market and that set by central bank is now in a tight range. Accordingly, the inter-bank exchange rate continues to be stable at around VND20,620 per dollar, and the actual rates at some local state-owned and joint stock commercial banks currently fluctuate from VND20,530 to VND20,640 per dollar.
The exchange rate is forecast to remain stable at least in the upcoming period. However, the State Bank statistics show that the banking sector saw 22.2 per cent growth in dollar outstanding loans while dollar deposits just hiked 8.9 per cent in 2011 by June 10.
Financial experts said serious imbalance in dollar lending and deposits in the first half of the year would be a significant threat to future dollar supply and potentially pressurise the exchange rate when dollar credit contracts come to maturity by the year’s end.
Ho Chi Minh City Open University’s Accounting-Finance-Banking Faculty head Nguyen Van Thuan assumed central bank policies had positive impacts on the foreign exchange market.
“However, it takes time for the dollar lending amounts to gradually go down since it had earlier shot to a high level,” Thuan said.
In fact, dollar credit currently accounts for around 19-23 per cent of the banking sector’s total outstanding loans.
“Vietnam status as a country facing a high trade deficit is still the fact of life and this will pressurise the dollar supply, especially on the back of current rising trade gap,” a National Financial Monetary Advisory Council member Dr. Tran Du Lich said.
From early 2011 until June 10, the State Bank reportedly bought around $3 billion to consolidate the national foreign reserves.
State Bank governor Nguyen Van Giau recently asserted that the central bank would further efforts to strictly control the forex market, gradually pull down trade deficit and basically stabilise the payment balance to keep the exchange rate stable.
Giau said outstanding dollar loans would drop in the wake of recent monetary policies such as those associated with dollar reserve requirement hiking, dollar ceiling deposit rate easing or restricted dollar loan provision.
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