Vietnam & World Forex Market News

Vietnam and World Currency Market News

Vietnam expands Dong trading band to support exports 2009-03-24 - Bloomberg

Viet Nam widened the trading band for the dong to 5% either side of a daily fixing rate, seeking to support an economy growing at the slowest pace in almost a decade.

The currency’s permitted fluctuation from the reference rate will widen from 3% starting from tomorrow, according to a statement posted on the central bank’s Web site. The first widening of the band since November will allow “exchange rates that are closer to supply and demand,” the State Bank of Vietnam’s Governor Nguyen Van Giau said in the statement.

The government is trying to bolster exports after the economy expanded 6.2% last year, the slowest pace since 1999. The World Bank and the International Monetary Fund last week forecast Vietnam’s 2009 growth will be 5.5% and 4.8%, respectively.

“This is the right decision by the government since it will enable the exchange rate between dong and dollar in the interbank market to be closer to the rates in the so-called free market,” said Phan Thi Chinh, deputy general director of Bank for Investment & Development of Vietnam, the country’s second- biggest bank.

The dong was little changed at 17,486.5 per dollar as of 6:05 p.m. in Hanoi, compared with 17,488.50 when the market closed on March 20, according to data compiled by Bloomberg. The currency touched its record low of 17,492 on Dec. 29.

‘Quite Stable’

The currency’s exchange rate at money changers in Hanoi was 17,650 to 17,680 today, versus 17,640 to 17,670 the previous day, according to a telephone directory information service, known as 1080, run by state-owned Vietnam Posts and Telecommunications.

“I don’t think from now on we will see further significant pressure to depreciate more,” said Fiachra MacCana, head of research at Ho Chi Minh City Securities Corp. “Because it is likely interest rates are close to bottoming out, our feeling is that depreciation pressure on the currency is less and less. The currency is going to be quite stable from now on.”

Vietnam in February posted its first year-to-date trade surplus since 2006. The surplus for the first two months of the year totaled $290 million, compared with a deficit of $5.13 billion in the same period a year earlier, according to the General Statistics Office. Exports fell 5.1% to $8.02 billion, while imports plunged 43.1% to $7.73 billion, according to the preliminary figures.

The central bank on Dec. 25 devalued the dong 3% by fixing its reference rate at 16,989 dong per dollar, versus 16,494 the previous day. The monetary regulator on Nov. 6 expanded the trading band to 3% from 2%.

“Along with the trading band expansion, the central bank will strictly punish any currency trading that exceeds the limit,” the statement said. The monetary regulator will also take measures to prevent hoarding of U.S dollars and “to ensure a healthy flow of foreign currencies in the economy,” it said.

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