FX waves cause ripples

Economic experts assumed the fluctuating dong-US dollar exchange rate in the recent weeks was just momentary and was not driven by the gold import move.

The buying price of US dollars at commercial banks surged to VND21,035 per dollar later last week, closing a week when the greenbacks hiked constantly in price. In the ‘black’ market, the dollars peaked at VND21,300. This was the third time the exchange rate surpassed the VND21,000 per dollar benchmark in 2013.

In reality, slow pace of economic rebound means the demand for dollars to import production materials would not be big.

Some market players attributed the move to the State Bank’s recent efforts to put a round sum of dollars into gold import to help local banks close their gold position before regulated deadline June 30, 2013.

A National Financial and Monetary Policy Council member Dr. Cao Sy Kiem did not buy into this idea.

He said recent volatile exchange rate was due to ‘psychology’ factor since there was a rumour about the likelihood for exchange rate revision after the State Bank reportedly spent over $1 billion on importing gold.

Kiem said exchange rate fluctuation only came when the dollar supply and demand underwent changes. Currently, the demand is forecast not to go up sharply thanks to economic rebound whereas the supply remains fruitful.

“In other words, there is no need for exchange rate concerns at current point of time,” Kiem added.

Senior financial export Nguyen Tri Hieu agreed current ‘fever’ was only short-lived and would be brought down when banks completed closing their gold position.

From the part of industry players, deputy general director at Vietnam International Bank (VIB) Le Quang Trung said dong-denominated loans’ lower rate has prompted firms to buy dollars for repayment then convert into taking dong-denominated loans to abate exchange rate associated risks.

The leader of another Hanoi bank said strong exchange rate volatility in the coming months would be unlikely since the banking system’s dollar volume liquidity was generally good in parallel to fairly plentiful national foreign reserves.

“Some factors which recently fueled the exchange rate were people converted into hoarding dollars in the face of constantly falling dong deposit rates, falling export led to banks’ lesser dollar buy-in amounts and some banks scaled up buying dollars to enhance their dollar position,” the executive noted.