Forex rate needs tweaking

July 04, 2012 | 14:10
The dong-US dollar exchange rate has been thrust under the microscope with economic experts pushing for a revision of the dong-US dollar exchange rate.

From early June the dong-US dollar exchange rate was slightly volatile, sometime surpassing VND21,000. However, industry insiders fear escalating demands for dollars in late months of the year, eating into Vietnamese overseas remittances and committed foreign direct investment flows.

HSBC Vietnam deputy director Pham Hong Hai assumed the exchange rate might remain stable in the third quarter and fluctuate in the fourth quarter when firms rush to hoard dollars to pay up debts and purchase goods serving traditional Lunar New Year (Tet) holidays.

Economic experts have warned of market chaos after a long period of calm.

Maritime Bank Economic Research Centre director Trinh Quang Anh said now was the right time to revise the exchange rate.

“The State Bank (SBV) should consider to shortly revising the rate within the range of 2-3 per cent as stated in early year to avoid forex market pressures in late months which is mostly driven by swelling demands for greenbacks to import goods. Revising the rate is also to prop up SBV’s recent move to lower mobilising rate cap and other interest rates,” he noted.

National Monetary Policy Advisory Council member and former Trade Minister Truong Dinh Tuyen said: “Right in early 2012 the council members had realised the target of reining in the dong-dollar exchange rate within 3 per cent range would be within reach but should we take on the move or not needs a careful consideration. We urged the central bank to extend the exchange rate band to become more active in governance by the year’s end.”

Tuyen said banking authorities needed to look at market movements to avoid giving out administrative usually less effective orders.

A National Financial Supervisory Commission top executive assumed the exchange rate 3 per cent range in 2012 could become a fact of life, but a flexible approach was needed to manage the rate to balance the government’s diverse development targets.
Pegging the exchange rate in a tight range as in the past time would affect monetary policy efficiency, hurting exports.

Senior economist Vo Tri Thanh suggested acting cautiously with the dong-dollar exchange rate in the face of appreciating US dollars globally.

By Thuy Lien

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