Dong-Dollar Rate May Balloon to VND17,000/USUS$1 Soon-Report

Friday, May 23, 2008
Viet Nam dong may depreciate to VND17,000/US dollar or more in the coming days after it set a new record high over the past two weeks due to thin greenback supply in the foreign exchange market and soaring demand of local importers, the state-run Tuoi Tre (Youth) newspaper said on May 19.

A banker said higher VND/U.S. dollar was largely attributed to higher demand of local importers and foreign banks. Foreign banks buy greenback to sell back to their clients while local importers need more greenback to import gold and other essential goods, the Viet Nam Investment Review newspaper said.

A Ho Chi Minh City-based bank director said speculation was also in part blamed for current inflating rate in Viet Nam.

The current situation is contrast to two months ago when greenback keepers were pushed to sell and banks were reluctant to buy, causing the rate to drop to VND15,300/U.S. dollar.

To cope with the situation, the State Bank of Viet Nam May 18 decided to abolish the ceiling interest rate of 12 per cent per annum and apply a new cap on commercial loans at 18% per annum, and increased base rate to 12% per annum from 8.75%, the Viet Nam Economic Times newspaper said.

Liquidity crunch signals are seen in Viet Nam’s banking sector and the Southeast Asian country is forecast to incur current accounts deficit to jump 19% of its GDP this year and the following years, the newspaper noted.

Viet Nam imported more than US$1.2 billion worth of gold in the first months this year, and total gold imports could reach US$4 billion for full year.