Trading band for dong widened

Hanoi (VNA) - The State Bank of Vietnam widened the daily trading band for the dong on November 6 from 2 percent to plus or minus 3 percent.

The change, intended to make the currency more export friendly, was the
fourth for the year as the central bank attempts to deal with the volatile
fluctuations on both domestic and global foreign-exchange market.

The decision, effective from nov.7, is also designed to closely reflect
foreign-currency supply and demand and to reduce the burgeoning trade
deficit.

The band was plus or minus 0.5 percent at the start of January and before
this year the central bank made only minuscule changes to it.

Vietnam paid 70.06 billion USD for imports in the first ten months
of the year against total foreign-currency income of 53.77 billion USD.

The trade deficit was 16.29 billion USD and in October alone, it totaled
700 million USD.

Demand for the dollar is forecast to further increase as foreign investors
transfer money from Vietnam to their own countries or mother
corporations.

The daily interbank rate was 16.511 VND to the US dollar on Nov. 6.
Vietcombank listed its buying-selling prices at 16.850/16.841 VND to the
dollar or the upper limit of the prevailing plus or minus 2 percent trading
band.

On the street, the dollar sold for more than 17,000 VND.

"The US dollar and the dong is likely to be traded at close to the upper
limit of the trading band- plus 2 percent above the daily interbank
rate-because of the increasing demand for the green back," forecast HCM City
Economic search Institute director Tran Du Lich.

"A more expensive dollar [against the dong] will help the Government to
reduce imports," he said.

But several importers assumed the dollar's appreciation against the dong
would be limited.

"Consumers are still tightening their belts and demand in general, but for
imports in particular, has fallen heavily," said Nguyen Ba Anh, the
general director of the Hanoi-based computer-electronics importer ACB.

"If imported goods cost more, demand may go even lower. Import companies
may reduce their imported goods and the dollar may not hit the upper limits
of the trading band."

The widening of the trading band is part of the State bank of Vietnam 's
efforts to stimulate economic growth.

The central bank has taken a series of monetary-policy decisions in the
past three weeks to free more money into the market.

Domestic banks now have an estimated 5.94 billion USD to lend,

The global economic turmoil has forced the Vietnamese Government to revise
its yearly growth estimate to 6.7 percent and after monthly inflation
dropped 0.19 percent in October financial planners are preparing to prevent
deflation.

Other Asian countries are also likely to shift their focus from defeating
inflation to sustaining growth.

Several Asian central banks have devalued their local currencies to
promote their exports.

The prime interest rate for the US dollar is now at 1 percent and the
currency is estimated to have depreciated about 10 percent against euro;
5.51 percent against Thai baht; 3.11 percent against the Singapore dollar
and 7.02 percent against Malaysia ringgit so far this year.-Enditem