Interbank market at the crossroads

illustration photo

A central bank report revealed that interbank dollar transaction volumes slightly decreased by $122 million during the third week of February. The volume was $3.2 billion a week after the local currency’s 9.3 per cent devaluation on February 11.

Greenback transaction volumes increased to $3.3 billion two days before the dong devaluation and the volume was also bigger than the figure before Tet, at $3 billion.

BIDV Currency Trading Department head Do Ngoc Quynh said the cooled interbank dollar market meant local banks were looking for clear greenback speculation trends.

“In addition to serving importers and exporters at this time, local dealers are waiting for others to take action,” said Quynh.

A General Statistics Office report showed that the trade payment deficit was around $950 million in February, this year. Of which, the export revenue value was only $5.2 billion, a 26 per cent decrease against January’s figure. The import revenue was $6.2 billion, a decrease of 22 per cent.

A foreign bank officer confirmed that not all local banks enjoyed good US dollar liquidity before the devaluation. “Therefore, the devaluation met local banks’ expectations. However, there were few banks offering their dollars,” said the officer.

OCB general director Trinh Van Tuan said there were a limited number of enterprises selling dollars to banks.

Standard Chartered general manager Louis Taylor said the dong was likely to remain under pressure throughout 2011 given the delicate balance of the country’s balance of payments, rising inflation and the projected credit growth in Vietnam.

“Our forecast is for one more devaluation in the second half of 2011. If the positive action taken by the authorities so far can be reinforced by measures which actively promote use of dong and holding dong then the level of downward pressure on the local currency will be less,” said Taylor.