VND depreciation won’t be sharp enough to give people a start
VND depreciation won’t be sharp enough to give people a start
No one thinks that the dong would be devaluated by 2 percent by the end of the year. In general, Vietnam would need more than 3 months for such a big currency devaluation.
Both businesses and individuals have stopped selling dollars unless they have reasons to because of the forecast on the 2 percent dong devaluation. They try to keep the greenback notes, hoping to sell them for better prices in the near future, when the dong/dollar exchange rate is adjusted.
The information about the 2 percent devaluation has been spread out after Prime Minister Nguyen Tan Dung, answering the US newswire Bloomberg, said Vietnam would devaluate the dong by 2 percent by the end of the year.
The interview was in September.
If this comes true, i.e. the dong would depreciate by two percent, the foreign currency market would be “choppy” after a long period of staying quiet.
There have been no “big waves” on the foreign currency market after the interview. On October 10-11, the State Bank of Vietnam reportedly bought big amounts of foreign currencies amid the profuse supply.
Government officials and analysts don’t believe such a sharp depreciation would occur.
A senior official said the watchdog agency will not “make such a big leap” by devaluating by 2 percent, especially in the last months of the year.
The official said people did not understand the Prime Minister’s statement properly.
At the interview, the Prime Minister said the dong would be devaluated by 2 percent at maximum by the end of the year, while the adjustment would be made depending on the market situation.
The source stressed that the Prime Minister’s statement is what the State Bank of Vietnam has been pursuing over the last many months. Earlier this year, it stated that the exchange rate would be stabilized, while the devaluation, if it is made, would not be higher than 2 or 3 percent.
The dong has been devaluated by one percent so far this year, which means that the currency would depreciate by no more than 2 percent from now until the end of the year.
“I believe that the exchange rate would be stable from now to Tet (February 2014),” the official said. “The resolution of the government September regular meeting confirms the policy.”
An analyst said if Vietnam devaluates the dong by 2 percent more by the end of the year as rumored, the move would come contrary to the policies it has been following.
The 2 percent depreciation just within a short time would break the stability of the dong/dollar exchange rate, causing a shock to people and businesses and give them a start.
If devaluating the dong is a must, the government would do this in the way which allows to minimize the negative impacts on businesses. In Vietnam, the slow move, step by step, is more favored than a big leap.
The dollar prices were stable on October 25 as commercial banks kept the quoted prices unchanged if compared with the day before, at VND21,120-21,130 per dollar.
The exchange rate quoted by Vietcombank, one of the biggest foreign exchange, and BIDV, quoted the prices at VND 21,075/21,115 and VND 21,080/21.120 (buy and sale).
vietnamnet
