ID :
20087
Thu, 09/18/2008 - 22:42
Auther :
Shortlink :
http://m.oananews.org//node/20087
The shortlink copeid
SBV acts for foreign exchange stability
Hanoi (VNA) - The State Bank of Vietnam started purchasing foreign currency and on September 17 depreciated the dong by 0.03 percent against last Friday, bringing the US dollar exchange rate to 16,514 VND.
The moves, made in the context of a local supply of US dollars, were
designed to stabilise the foreign exchange market (FX), State Bank Governor
Nguyen Van Giau told Vietnam News.
The value of the dong has fallen by 19-20 percent against the US dollar
since early September. At commercial banks last week, US dollar were going
for 16,600 VND, while on the black market, US dollar gained only a little
more at around 16,620 VND.
With the daily trading band currently at minus/plus 2 percent, banks can
list dollars at a maximum of 16,844 VND and a minimum of 16,183 VND, higher
than the previous buy/sell prices of 16,560/16,610 VND.
The central bank's move to depreciate the dong via the interbank market was
greatly appreciated by the export community.
Boosting export is considered tremendously important for development, a
stimulus for production and the creation of more jobs.
Moreover, if the central bank did not intervene to stabilise exchange rates,
the cheaper foreign currencies could have led to an even larger trade
deficit.
"It's good move by the central bank, which shows that SBV is managing
exchange rates more flexibly to catch up with the real situation," Cao Sy
Kiem, former governor of the State Bank and chairman of the Association for
Small and Medium Sized Enterprises, told Vietnam News.
Kiem noted that the current abundance of foreign currency was only
temporary.
"I think it's a normal action when supply is abundant and demand is modest,"
Nguyen Thanh Toai, the deputy general director of Asia Commercial Bank told
the newspaper.
Commercial banks are reporting to be over their cap of 30 percent foreign
currency in their total reserves.
They are not allowed to hold more foreign currency than the cap, forcing the
central bank to ultimately buy it.
Purchasing foreign currency and raising interbank exchange rates have
stirred some concerns about a higher inflation rate, as more dong may be
pumped into circulation.
In the first eight months of the year, Vietnam 's trade deficit was 16
billion USD, or 36.8 percent of total export turnover, two times more than
the same period in 2007.
The consumer price index (CPI), the main indicator of inflation, in the
first eight months of the year increased by 22.14 percent over the same
period of 2007.
Some bankers and economists assured that these recent moves would not result
in higher inflation.
"The SBV has many tools to withdraw the dong back into their pockets such as
issuing treasury notes with higher interest rates," said Kiem.
Other foreign currency sources are expected to weaken in the latter part of
the year, taking pressure off the foreign currency market.
Remittance serves as one example. Normally, remittance from the US is a
major source of foreign currency.
With the US in serious economic woes this year, a senior official of
Vietcombank told Vietnam News that remittance this year will likely be
minimal.
Moreover, foreign portfolio investment flow is forecast to be weaker than
last year, and will put less pressure on the foreign currency market, since
the stock market has not fully recovered.-Enditem
The moves, made in the context of a local supply of US dollars, were
designed to stabilise the foreign exchange market (FX), State Bank Governor
Nguyen Van Giau told Vietnam News.
The value of the dong has fallen by 19-20 percent against the US dollar
since early September. At commercial banks last week, US dollar were going
for 16,600 VND, while on the black market, US dollar gained only a little
more at around 16,620 VND.
With the daily trading band currently at minus/plus 2 percent, banks can
list dollars at a maximum of 16,844 VND and a minimum of 16,183 VND, higher
than the previous buy/sell prices of 16,560/16,610 VND.
The central bank's move to depreciate the dong via the interbank market was
greatly appreciated by the export community.
Boosting export is considered tremendously important for development, a
stimulus for production and the creation of more jobs.
Moreover, if the central bank did not intervene to stabilise exchange rates,
the cheaper foreign currencies could have led to an even larger trade
deficit.
"It's good move by the central bank, which shows that SBV is managing
exchange rates more flexibly to catch up with the real situation," Cao Sy
Kiem, former governor of the State Bank and chairman of the Association for
Small and Medium Sized Enterprises, told Vietnam News.
Kiem noted that the current abundance of foreign currency was only
temporary.
"I think it's a normal action when supply is abundant and demand is modest,"
Nguyen Thanh Toai, the deputy general director of Asia Commercial Bank told
the newspaper.
Commercial banks are reporting to be over their cap of 30 percent foreign
currency in their total reserves.
They are not allowed to hold more foreign currency than the cap, forcing the
central bank to ultimately buy it.
Purchasing foreign currency and raising interbank exchange rates have
stirred some concerns about a higher inflation rate, as more dong may be
pumped into circulation.
In the first eight months of the year, Vietnam 's trade deficit was 16
billion USD, or 36.8 percent of total export turnover, two times more than
the same period in 2007.
The consumer price index (CPI), the main indicator of inflation, in the
first eight months of the year increased by 22.14 percent over the same
period of 2007.
Some bankers and economists assured that these recent moves would not result
in higher inflation.
"The SBV has many tools to withdraw the dong back into their pockets such as
issuing treasury notes with higher interest rates," said Kiem.
Other foreign currency sources are expected to weaken in the latter part of
the year, taking pressure off the foreign currency market.
Remittance serves as one example. Normally, remittance from the US is a
major source of foreign currency.
With the US in serious economic woes this year, a senior official of
Vietcombank told Vietnam News that remittance this year will likely be
minimal.
Moreover, foreign portfolio investment flow is forecast to be weaker than
last year, and will put less pressure on the foreign currency market, since
the stock market has not fully recovered.-Enditem
