May 13, 2010

Vietnam to Keep Dong Rate Stable, Central Bank Says

Vietnam’s central bank will keep the dong’s exchange rate stable as the improving economy helps support the currency, according to a statement on its website.

The State Bank of Vietnam has lowered the reference rate for the dong twice in the past six months, narrowing the gap between the official rate and that in the black market from as much as 12 percent. The currency will be managed “in a flexible manner based on supply and demand,” Deputy Governor Nguyen Van Binh said on May 10.

The currency traded at about 19,105 against the dollar in the so-called black market today, weakening from around 19,040 yesterday, according to a telephone information service that cites prices at gold shops. In the interbank market, the dong was 0.1 percent stronger at 19,003 as of 11:43 a.m. in Hanoi. It has depreciated 5.9 percent since Nov. 25, when the first of the two most recent devaluations was announced.

“With quite a lot of pressure recently on emerging-market currencies to drop because of the European debt crisis, the Vietnamese central bank probably doesn’t want the dong to fall too much,” said Hideki Hayashi, a global economist at Mizuho Securities Co. in Tokyo.

The State Bank of Vietnam has bought more than $1 billion from financial institutions since mid-April and local banks have “relatively abundant” supplies of foreign currency, it said today on its website.

“They want a weaker currency for sure, but they don’t want market players to attack the currency too much given the current crisis,” Hayashi said. The central bank may not devalue the dong as long as the European debt crisis persists, he said.

Vietnam’s economy grew 5.8 percent from a year earlier in the first quarter, after expanding 5.3 percent in 2009, and the government is targeting growth of 6.5 percent this year. To achieve that goal, expansion will have to accelerate to 7 percent in the second half of 2010, Prime Minister Nguyen Tan Dung said last week.

http://www.businessweek.com/news/201...-update1-.html