Vietnam has no devaluation plans: newspaper

The State Bank of Vietnam has no plans to adjust the dong exchange rate against the US dollar, even though the dong's value has been dropping on the unofficial market, a local newspaper reported on Tuesday.

"At present the State Bank does not have any plans for exchange rate adjustment," Governor Nguyen Van Giau was quoted by the Saigon Giai Phong daily as saying, rejecting market rumors of a dong devaluation.

The central bank has devalued the dong three times since November and speculation of another devaluation has been putting pressure on the currency, making businesses reluctant to sell dollars.

Dollar demand has also been rising as businesses need the currency for loan repayments and importers need dollars for settlements.

However, the dong edged up to 19,870/19,920 per dollar on the unofficial market on Tuesday morning from 19,920/19,970 on Monday, while it was steady at VND19,490/19,500 on the interbank market, with the selling rate at the permitted ceiling.

Victoria Kwakwa, the World Bank's representative in Vietnam, told reporters on Tuesday that "we think that broadly the government has been moving in the right direction" on monetary and fiscal policy.

However, she said more could be done by the authorities to communicate their policy stance and give more information on indicators, so as to build up confidence in overall macroeconomic management.

This would help "address some of the left-over expectations of inflation and continued instability that are underpinning some of the challenges".

The Bank's lead economist for Vietnam, Deepak Mishra, said he expected pressure on the dong to ease over time, but how the market reacted would depend on the government putting forward a "credible road map" for dealing with the problem.

The International Monetary Fund warned in September that Vietnam needed to concentrate on maintaining the level of the dong, and said that repeated comments from the government about the need to lower lending rates was counter-productive.

"A lack of coordination between monetary and fiscal policies, or the appearance thereof, would amplify market skepticism," it said.

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Dollar rises to record vs dong on unofficial market

HCMC – The U.S. dollar surged to a new record high of VND20,000 per dollar on the unofficial market on Tuesday and as a result businesses are seeking to hold on to the greenback for fear of foreign exchange risk.

The dollar on the underground market on Tuesday afternoon traded at VND19,980 for buying and VND20,020 for selling, up VND50 from the previous day and VND170 from late last week.

Reportedly rumors that the central bank would continue devaluing the Vietnam dong were behind the dollar rally on the unofficial market on Monday. However, the central bank governor, Nguyen Van Giau, on Tuesday affirmed in Saigon Giai Phong newspaper that there would be no more dong devaluation but his message did not appease the market.

The central bank has yet to take a single move to ease the dollar fervor. Commercial banks on Tuesday quoted the dollar selling price at VND19,500 per dollar although no companies could buy the dollar at that price.

Corporate clients must now pay extra fees to buy dollars at banks, virtually appreciating the dollar versus the dong. 

There are no official reasons for the dollar jump but market watchers said shaky confidence in the local currency had led to volatility on the foreign exchange market, so any rumors could drive the dong down.

When the dong fell to VND20,000 per dollar, the dollar price in futures contracts on Asian markets on Tuesday afternoon was VND19,950 for one month and VND21,520 for one year.

There are signs that enterprises are holding on to dollar funds on their bank accounts. A source from the State-owned bank BIDV told the Daily BIDV’s dollar purchases had dipped strongly recently, because corporate customers declined to sell.

Individuals are also speculating on the dollar, the source said.

According to a report by the central bank’s HCMC Branch by late August, dollar purchases from enterprises accounted for 40% of the city-based banks’ total.

If enterprises had sold the dollar to banks last week, it would have lost VND500 for each dollar. Therefore, no one wants to sell dollars to banks given the continued price increase of the dollar on the unofficial market, the source said.

Meanwhile, companies having dollar debt are rushing to buy dollars for premature payment.

Outstanding dollar loans rose sharply in the first nine months of this year, and in HCMC alone, dollar credit expanded by a whopping 36.4%.

Dollar supply is in decline while dollar demand is sharply up, leading to a sudden imbalance on the foreign exchange market, the source said. However, the source affirmed BIDV could meet all legitimate corporate needs for dollars.

Meanwhile, the general director of a joint-stock bank told the Daily that dollar funds were ample but prohibitively high prices really mattered.

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Vietnam has no devaluation plans

HANOI - The State Bank of Vietnam has no plans to adjust the dong exchange rate against the US dollar, even though the dong's value has been dropping on the unofficial market, a state-run newspaper reported on Tuesday.

"At present the State Bank does not have any plans for exchange rate adjustment," Governor Nguyen Van Giau was quoted by the Sai Gon Giai Phong daily as saying, rejecting market rumors of a dong devaluation.

The central bank has devalued the dong three times since November and speculation of another devaluation has been putting pressure on the currency, making businesses reluctant to sell dollars.

Dollar demand has also been rising as businesses need the currency for loan repayments and importers need dollars for settlements.

However, the dong edged up to VND19,870/19,920 per dollar on the unofficial market on Tuesday morning from VND19,920/19,970 on Monday, while it was steady at VND19,490/19,500 on the interbank market, with the selling rate at the permitted ceiling.

Victoria Kwakwa, the World Bank's representative in Vietnam, told reporters on Tuesday that "we think that broadly the government has been moving in the right direction" on monetary and fiscal policy.

However, she said more could be done by the authorities to communicate their policy stance and give more information on indicators, so as to build up confidence in overall macroeconomic management.

This would help "address some of the left-over expectations of inflation and continued instability that are underpinning some of the challenges".

The Bank's lead economist for Vietnam, Deepak Mishra, said he expected pressure on the dong to ease over time, but how the market reacted would depend on the government putting forward a "credible road map" for dealing with the problem.

The International Monetary Fund warned in September that Vietnam needed to concentrate on maintaining the level of the dong, and said that repeated comments from the government about the need to lower lending rates was counter-productive.

"A lack of coordination between monetary and fiscal policies, or the appearance thereof, would amplify market skepticism," it said.

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