Viet Nam to Ensure Dong Rate as Dollar Demand Gains

Tuesday, May 27, 2008
Viet Nam's central bank said it has the ability to ensure an orderly exchange rate after a jump in demand for dollars widened the gap between the official value of the currency and the so-called free-market rate.

``The demand for U.S. dollars is accelerating,'' Nguyen Quang Huy, director of the banking-management department, said in a statement on the bank's Web site late today. The increase was caused by Viet Nam's highest inflation since 1992, Huy said.

The State Bank of Viet Nam today set the daily reference rate for the dong at 16,060 to the dollar. Still, the free-market rate, which is used by money changers, was 17,500 to the dollar, newspaper Thoi Bao Kinh Te Viet Nam reported today.

Viet Nam's inflation accelerated to 25.2% in May, driven by record rice and energy prices, according to a statement from the General Statistics Office in Hanoi today. On a monthly basis, prices rose 3.9% from April.

The ``high demand from certain people for dollars is the main cause of the rising rate in the free market,'' Huy said in the statement, which was released in a question-and-answer format. Still, the scale of the free-market was small and wouldn't disrupt the financial, monetary and business operations of the economy, Huy said.

The government planned to continue carrying out a ``stable exchange rate policy'' within a trading band, Huy said, reiterating existing policy. (Bloomberg)