The State Bank of Viet Nam is not planning any adjustments to foreign exchange rates, State Bank Governor Nguyen Van Giau said yesterday in Ha Noi.

The statement was made to the public in an effort to ease speculative rumours that the Vietnamese dong might be further devalued – rumours which had driven the black market price for a US dollar yesterday to VND20,030-20,050, up VND150 over Monday's rate.

On the non-deliverable forward (NDF) market – a currency futures market – the US dollar yesterday was expected to rise to VND19,948.99 by next month, VND20,279 in three months, VND20,749.540 in six months and VND21,520.76 by October of next year.

Rumours had also begun circulating that the interbank rate – the rate at which banks trade currencies amongst themselves – had already risen as high as VND19,870-19,990 per dollar, although the official rate set by the central bank remained at VND18,932 per dollar.

Commercial banks were meanwhile quoting norminal sell prices of VND19,500 per dollar, while black market forex dealers were reporting a spike in individuals buying dollars.

The deputy head of the State Bank's HCM City branch, Nguyen Hoang Minh, said that the central bank has worked with relevant agencies to establish hot lines to monitor the forex market and stamp out speculative business practices.

The State Bank also reaffirmed that it would penalise banks that sell the dollar at prices higher than the official ceiling rate.

But, Minh noted, the HCM City branch has not yet calculated practical demand for the dollar in October, and that market inspections were difficult because of limited human resources.

A senior central bank official who asked to remain anonymous commented, "The sudden appreciation of the greenback has resulted from rising global gold prices and dollar accommodation. Some enterprises which have revenue in US dollars are also keeping the dollars in accounts and not selling them back to the banks.

"However, there is a positive balance in the dollar supply in the banking system of US$250-300 million.

The central bank has devalued the dong three times since November and speculation of another devaluation has been putting pressure on the currency, making businesses reluctant to sell dollars.

Victoria Kwakwa, the World Bank's representative in Vietnam, told reporters on Tuesday that "we think that broadly the government has been moving in the right direction" on monetary and fiscal policy.

However, she said more could be done by the authorities to communicate their policy stance and give more information on indicators, so as to build up confidence in overall macroeconomic management.

This would help "address some of the left-over expectations of inflation and continued instability that are underpinning some of the challenges".

The Bank's lead economist for Vietnam, Deepak Mishra, said he expected pressure on the dong to ease over time, but how the market reacted would depend on the government putting forward a "credible road map" for dealing with the problem.

The International Monetary Fund warned in September that Vietnam needed to concentrate on maintaining the level of the dong, and said that repeated comments from the government about the need to lower lending rates was counter-productive.

"A lack of coordination between monetary and fiscal policies, or the appearance thereof, would amplify market skepticism," it said.

Source: VNS, Tuoitrenews