HANOI - Vietnamese banks have enough dollars to keep the dong from succumbing to immediate pressure from higher-than-expected inflation and a persistent trade deficit reflected in this month's data, traders said.
But economists warn that could worsen later in the year, putting the currency under renewed downward pressure.
On Monday the Ministry of Planning and Investment estimated the trade deficit hit an estimated $1.05 billion in September, sending the deficit for the first nine months of the year to $8.58 billion.
The government expects the full-year shortfall to reach about $14 billion.
Annual inflation this month accelerated for the first time since March, hitting 8.92 percent. September's consumer price index rose 1.31 percent from last month, the highest monthly rise since February, the government said last week.
Nevertheless, the dollar/dong exchange rate has been steady since the State Bank of Vietnam devalued the currency by 2 percent on Aug. 18.
"Banks now have ample dollar funds so they can deal with client borrowing and trading," said a foreign exchange manager at a Hanoi-based lender.
Official and unofficial exchange rates have been close to the VND19,500 trading band limit since the devaluation. On Monday there was a VND40, or 0.2 percent, difference between dollar/dong bid prices on interbank and unofficial markets.
The gap is sometimes seen as an indicator of pressure on the currency to depreciate.
Overnight dollar interest rates for loans on the interbank market have ranged between 0.41 percent and 0.46 percent, Reuters data showed.
Banks have benefited from dollar inflows at businesses that tend to receive payments from overseas during the later months of the year, traders said.
Still, Nguyen Minh Phong, an economist at the Hanoi Research Institute for Socioeconomic Development, said the widening trade deficit and modest foreign direct investment inflows would keep the dong under pressure.
"Vietnam's FDI disbursement has only started to pick up and cannot significantly support the exchange rate", Phong said.
Vietnam's total balance of payments deficit may reach $4 billion this year, it said.
Higher demand for dollars for import later in the year, combined with Vietnam's thin foreign exchange reserves, would contribute to the pressures, economists said.
Foreign investors disbursed an estimated $8 billion in Vietnam in the first nine months of this year, a rise of 4.8 percent from the same period last year. Meanwhile, Vietnam's economy expanded by an estimated 6.52 percent in the first nine months of 2010 from the same period a year earlier.
