Petro giant dramatically fuels dollar supplies

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Last week, PetroVietnam chairman Dinh La Thang revealed that the firm had sold all its $2.7 billion from crude oil exports to the banking system during 2011’s first quarter.

Thang said PetroVietnam had strictly followed the government’s plea for state-owned corporations to sell their dollars to the local banking system.

Duong Thu Huong, general secretary of the Vietnam Banking Association, said it was a sizeable amount to help increase dollar system supplies.

“More importantly, this move will send a positive message to the market participants that the dollar supply is adequate. This will maintain the dong’s value against the dollar. By then, other dollar speculators might sell out their dollars,” said Huong.

In February, Prime Minister Nguyen Tan Dung stressed that the government would deploy all means to control the forex market.

Two weeks ago, State Bank governor Nguyen Van Giau revealed that by end of March, total dollar-denominated banking system deposits of state owned corporations had reached $3.61 billion, including $376 million in term deposits.

By end of 2010, Deputy Prime Minister Nguyen Sinh Hung said total dollar denominated banking system deposits stood at around $21 billion from corporates and individuals.

Vo Thi Sanh, head of BIDV’s asset liability division, said the news was good for the market, as PetroVietnam had sizable amounts of dollars.

“The forex market is really moving into the safety zone,” said Sanh.

During the last few months, the central bank intervened frequently in the country’s foreign currency and gold shops. Adding action to rhetoric the government cracked down on foreign currency trading at gold shops and is considering banning gold bullion trading.

With improved confidence in the local currency, by end of March, the

dong on the interbank market had appreciated by 1.4 per cent against the end of February, trading at VND20,960/USD.

At a National Assembly meeting on March 26, Giau announced that he expected to see a surplus of $2 billion in the country’s balance of payments for 2011 owing to a narrowing trade deficit. In 2010, the balance of payments deficit decreased to $3.07 billion from $8.8 billion in 2009.

Sherman Chan, an HSBC economist, said provided tightening measures were duly implemented, the trade balance would improve in coming months.