US dollar devalues 0.6pct against VND: Ministry

Aug 7th at 21:14
07-08-2012 21:14:05+07:00

US dollar devalues 0.6pct against VND: Ministry

The US dollar in July devalued some 0.6 percent against the Vietnam dong, said an information center under the Ministry of Industry and Trade.

 

The foreign exchange rate between the Vietnam dong and the US dollar in July remained stable, after a strong correction in late May, said the Information Center for Industry and Trade.

The bid and ask prices for the greenback were at around VND20,870 per dollar and VND20,900 per dollar respectively.

The reduction means the foreign exchange market remains stabilized, as the listed price of the greenback in the black market continued to be lower than that listed at the commercial banks.

“This suggests that trading of the dollar has become more unpopular, and mainly conducted between those who really need the greenback for foreign trade purposes.”

According to the center, the short-term adjustment in foreign exchange rate in late July is just a technical move of the local banking system after a period of stabilization.

Local commercial banks have increased the purchase price of the greenback in order to prepare the capital sources for the demand of foreign currency borrowing after the State Bank of Vietnam (SBV) hinted that it would not place a restriction on eligible debtors of foreign currency loans in 2012.

They also want to be well-prepared for any forex adjustment by year-end due to increased demand for foreign currencies due to increased imports at that time.

As a result the center has predicted that the foreign exchange rate will remain stable at around VND21,000 per dollar in the remaining months of this year. But the rate may adjust sharply under the impact of surging demand.

Earlier, the National Financial Supervision Commission (NFSC) said despite the forex fluctuation, the official forex rate is still regularly below VND21,000 per dollar, equivalent to an amplitude of less than 0.8 percent compared with the average exchange rate. It signaled that the interbank exchange rate will remain stable.

On the other hand, both foreign direct and indirect investment inflows continued to show positive signs, it said.

While foreign direct investment is relatively abundant, with a year-on-year increase of more than 17 percent, indirect investment soared more than 40 percent over the same period last year with the increase in capital contributions or share purchases from foreign partners for merger and acquisitions (M&A) purposes.

The M&A trend is largely taking place in the banking sector, like that of Vietcombank, and the success in international bond issuance at international stock markets, like that offered by Vincom and VietinBank.

It showed that foreign investors continue to believe in Vietnam's economic prospects, said the NFSC.

The commission also forecast that there may be no forex risk for those borrowing in the U.S. dollar, as the Vietnam dong’s lending rate has fallen about 15 percent per year, but still higher than dollar interest rates of 4.5 percent per year on average.

Moreover, the central bank has vowed not to let the exchange rate fluctuate more than 3 percent in 2012, giving a firm guarantee to eliminate the risk of exchange rate fluctuations.

But the NFSC also recommended that monetary policies should be run to maintain equilibrium between the domestic currency and foreign currency deposits.

In particular, the SBV should not lower the policy rates so fast in order to avoid exchange rate fluctuations, contributing to the buildup in business confidence.

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