VietNamNet Bridge - Commercial banks all have raised the dollar selling price to the ceiling level of VND21,036 per dollar. The State Bank’s Exchange late last week quoted the selling price at VND21,360 per dollar. These are the signals for a new dong/dollar exchange rate adjustment?

The dollar prices quoted by commercial banks on June 12 showed the slight increases in comparison with the previous days. At Vietcombank, the dollar price was quoted at VND21,020-21,036 per dollar (buy & sale), an increase of VND35 per dollar in sale price over June 11.

At BIDV, the dollar price was quoted at VND21,015-21,036 per dollar on the same day, a VND5 per dollar decrease over the buy sale on June 11. Vietinbank’s rates were VND21,030-21,036. On the black market, the dollar was traded at VND21,250-21,270 per dollar.

The Deputy General Director of a joint stock bank in Hanoi said the demand has increased sharply over the last two weeks, while the supply remains unchanged.

The banker has also cited the narrowing of the gap between the dong and the dollar interest rates as a reason to explain the dollar price increases. The dong interest rates have been lowered by commercial banks recently in an effort to boost lending.

It happened in the past that once the dong and the dollar interest rates came closer to each other, people would try to hoard dollars instead of dong, which would raise the dollar price.

A rumor has been spread out recently that the dong would be devaluated by 2 percent, which might have prompt people to collect dollars.

People believe that the dollar price increases in the market could be the signals for a new decision of the State Bank to adjust the dong/dollar exchange rate.

However, the State Bank has said it is not going to adjust the exchange rate at this moment, affirming that banks have raised the dollar selling price just to balance their foreign currency trade.

The latest report of the State Bank of Vietnam said that the dollar price increases occurred only for a short time, which has helped improve the banks’ foreign currency positions. The dollar prices have decreased to VND20,980-21,030 per dollar.

Meanwhile, experts all believe that the exchange rate adjustment would be an unreasonable move at this moment.

Dr. Nguyen Tri Hieu, a banking expert, thinks that the higher demand from businesses for importing goods to prepare for a new production period has led to the slight increases of the dollar prices. Meanwhile, some other enterprises want to borrow dollars to pay debts.

However, Hieu believes that it’s not the right time now to devaluate the dong to restrict the imports and facilitate the export. It would be better if the State Bank considers raising the trade band from one percent currently to two or three percent to help them take initiative in their foreign currency trade activities.

Analysts also think that the dollar price increases over the last two weeks are just “temporary,” and that there’s no need to adjust the exchange rate now. In principle, the State Bank would have to make an intervention when necessary, but it should take cautious steps by making small adjustments in order to avoid shocks to the market.

Tien Phong