The CEO of a commercial bank on June 10 told Bizlive that he agrees with experts that Vietnam has become a magnet attracting capital.

A stable political situation, high GDP growth rate, low inflation rate for many years and stable exchange rate are the big advantages that help Vietnam lure foreign capital.

“The dong/dollar exchange rate has been fluctuating considerably over the last month, but I strongly believe that the State will continue pursuing the policy on stabilizing the exchange rate,” he said.

“As a banker, I have seen foreign curencies flowing en masse. The foreign capital flow growth can be seen clearly day after day,” he commented.

The dollar price on the interbank market on June 10 depreciated significantly by VND28 per dollar compared with the previous trading session. Another decrease of VND27 per dollar was reported on the next day, June 11.

The sell prices quoted by commercial banks saw adjustments last week, decreasing from VND23,460 per dollar to VND23,370 and then to VND23,380 late last week.

Analysts commented that this was the first time since early May, when the exchange rate began fluctuating, that a big adjustment had occurred.

The exchange rate has been adjusted in the context of the narrowing of the gap between Vietnam dong and dollar interest rates. The gap fell from 1 percent to 0.6 percent in recent days.

“The dollar price in the market is now determined by the foreign currency supply and demand, not by other factors,” Bizlive quoted a senior official of the State Bank as saying.

The official said ‘foreign currencies are flowing in every day’, saying that the supply of foreign currencies in on the rise, and that the capital flow is associated with portfolio investment.

Reports all show the ‘rarely seen increase’ in the foreign currency poisitions of commercial banks thanks to the net purchase of foreign currencies in the market.

Some analysts warned that the relatively high trade deficit in May ($1.3 billion) and the first five months of the year (more than $500 million) may have a negative impact on the foreign currency supply.

However, experts all agreed that the trade deficit is ‘not worrying’ because most of the imports were input materials for domestic production.

Meanwhile, Vietnam has other foreign currency sources, including FDI and foreign portfolio investments.

In the near future, the dong/dollar exchange rate would depend on the possibility of the FED reducing the prime interest rate. Observers said the interest rate cut may be implemented in July.

 Mai Chi

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