Vietnam & World Forex Market News

The VND/US$ exchange rates quoted by commercial banks on May 26 were at the ceiling level of 17,782 dong per dollar. BIDV, in its latest report, predicts that the VND will lose no more than 6 percent of its value by the end of the year.

“Purchases of foreign currencies have not increased,” said the foreign currency trade director of a bank, who added that the dollar price on the interbank market on May 26 was hot, at VND18,050/US$1.

How high will the VND/US$ exchange rate be at the end of 2009? According to the Bank for Investment and Development of Vietnam (BIDV), the main thing that has made the dollar price increase sharply recently is speculation.

BIDV does not think that short supply is the reason behind the price increase, especially as the net foreign currency volume flowing into Vietnam in the first four months of the year reached $1.2 billion.

Deposits in foreign currencies in Vietnam’s banking system by the end of April had increased by 4.52 percent over the end of 2008, while outstanding loans in foreign currencies had decreased by 1.6 percent in the same period.

BIDV, while predicting Vietnam’s trade deficit would be 6.9 billion dollars (down by 60 percent from last year), foreign direct investment disbursement $5 billion, and foreign portfolio investment in Vietnam $2.5 billion (it was 20 billion in 2007), believes that it is not unthinkable that foreign investors will withdraw capital on a massive scale, thus putting pressure on the exchange rate.

BIDV believes that 2009 will be much better than 2008 as far as payment balance deficit, at $1 billion only. Except speculation, the problems of 2008, including the macroeconomic situation, inflation, trade balance deficit will not be the big concerns for 2009.

BIDV believes in the foreign currency balance capability of the national economy. Therefore, with the current foreign currency reserves of $20 billion, the country may be able to stabilise the foreign currency market with the highest possible depreciation of the local currency at 5-6 percent this year.