Dong appreciates despite devaluation by State Bank
Dong appreciates despite devaluation by State Bank
VietNamNet Bridge – The dollar price has been falling for one week, despite the State Bank of Vietnam’s move to devaluate the dong by one percent one month ago.
The dollar price quoted by Vietnamese commercial banks on July 14 was even lower than before the dong/dollar exchange rate was adjusted by the bank.
Vietcombank, for example, sold dollars at VND21,200 per dollar on that day. Eximbank and ACB quoted the dollar price at VND21,220 per dollar.
Meanwhile, the dollar price quoted by commercial banks on the days before June 19, the day when the central bank adjusted the exchange rate, was at the ceiling level of VND21,246 per dollar.
As such, the dong value against the dollar has increased in comparison with the days prior to June 19, which was not expected by the State Bank.
The move by the central bank to devaluate the dong by one percent in mid-June was believed to aim to help boost exports.
Escalating tension in the East Sea forced Vietnamese export companies to seek new export markets, and the dong devaluation would help make Vietnamese products more competitive in the world market.
A banker said the central bank had its reasons to adjust the dong/dollar exchange rate in mid-June.
In general, the days at the end of the second quarter are the time when demand for dollars increases, as Vietnamese enterprises need dollars to make payment for imports, while foreign invested enterprises in Vietnam need to buy dollars to transfer part of their profits abroad.
The exchange rate adjustment then brought prompt effects. Commercial banks immediately raised the dollar, quoting prices to VND21,340-21,380 per dollar starting from June 19.
However, the upturn stopped. The US dollar price has been decreasing in the last week thanks to an abundant dollar supply from ODA (official development assistance), foreign direct investment (FDI) and foreign portfolio investment (FPI).
It is doubtful if the State Bank will continue devaluing the dong, since its latest exchange rate adjustment did not depreciate the dong or help boost exports.
Meanwhile, a banking expert commented that it is still too early to say if the State Bank’s latest devaluation of the dong can help boost exports.
He admitted that the dong has been appreciating, but said this is just a temporary phenomenon in the context of abundant supply.
He went on to say that it is still necessary to wait until the end of July to know if the State Bank will adjust the exchange rate once more, because enterprises have the habit of buying dollars at month-end.
Once the dollar demand increases by the end of the month, the dollar price may return to the track the State Bank wants it to go.
In the latest news, the State Bank Exchange on July 15 unexpectedly raised the dollar buy price by VND100 per dollar to VND21,200 per dollar. The selling price stood at VND21,400 per dollar.
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