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| A woman counts U.S. dollar notes. Traders have been watchful for forex movements since the central bank devalues Vietnam dong by over 2% - Photo: Le Toan |
As the new inter-bank rate was revised to VND18,932 per dollar on Wednesday, banks and the unofficial market immediately chased up the greenback price, almost to the maximum limit of VND19,500 at banks and even VND19,700 at private counters. A softer local currency lends support to exporters, but also prompts outcries among importers, many of whom will likely spur prices to offset the forex rate rise.
Most banks on Wednesday morning quoted the spot rate at VND19,310 per dollar, but Asia Commercial Bank raised their price to VND19,490 in the afternoon. But the black market reacted swiftest, boosting the dollar to VND19,700 in morning trade before lowering it to about VND19,450 in the afternoon, still VND110 higher than the previous day.
Nguyen The Ke, director of a transaction office of Bank for Investment and Development of Vietnam, said that almost all banks and enterprises were still cautious in watching the market.
The tone is similar among certain manufacturers. Vu Van Minh, CEO of Giay Viet Company, said any sharp movement, upwards or downwards, always sent rippling effects, and therefore, “we will have to watch the market.”
Manufacturers that rely on imported materials are feeling the pinch.
Trang Van Tot, board chairman cum CEO of the pharmaceutical firm Glomed in VSIP 2, told the Daily that the input cost would increase correspondingly, but medicine prices would not increase due to the price-control policy of the State. But the bigger concern, Tot said, is that the company may find it more difficult to borrow dollars for imports due to forex uncertainties.
Store chain operators, however, will likely keep prices unchanged in the coming weeks, due to good inventories as well as stable supplies.
Nguyen Thi Anh Hong, general director of Maximart, said prices on her shelves would remain stable as suppliers had pledged so to the store chain.
It seemed steelmakers were the early birds to raise prices, however.
Do Duy Thai, CEO of Viet Steel Co., told the Daily that his company began raising steel prices by VND300 per kilo for all products on Wednesday.
“We have to raise product prices to offset the increase on input material cost. However, we will still suffer from dollar loans as investment for our project or for importing machines,” he said.
Despite a big steel maker, Thai said, Viet Steel Co. did not buy any hedging services to insure business against forex risks before because the fee was so high.
Nguyen Manh Ha, chairman of Dai Phuc Steel Co., said that he was watching the market and would wait for a few more days before having any changes in his business plan.
Some others cast a positive note, saying the forex change would help stabilize the forex market for the rest of the year.
VinaSecurities said that the forex market had been somewhat unstable due mostly to concerns about maturity of dollar loans, economic concerns in the U.S. and the EU.
So, “this move has an important signaling effect that the central bank has taken a concrete step to stabilize the forex rate… After the depreciation of 3.4% in February, the forex market was calm for five months. If history were to repeat itself, the rate would stay stable until the end of 2010,” VinaSecurities commented.
The stronger dollar has sent the gold price up sharply.
The local gold price on Wednesday even hit VND28.66 million per tael, VND200,000 higher than the previous day. However, the price declined gradually and finished the trading day at VND28.56 million per tael. A tael equals 1.2 troy ounces.
Meanwhile, by 5:00 p.m. on Wednesday gold was traded at US$1,224.3 on the European market, decreasing US$2.7 an ounce from Tuesday.
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