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State Bank denies that Vietnam is short of foreign exchange   2010-08-06 - Saigon tiep thi, Thoi bao Kinh te Vietnam

The foreign currency market has tightened up.  Individuals have had trouble persuading banks to sell them dollars, and businesses have had to pay a premium for the dollars they need.  Even so, the State Bank  maintains that there’s no shortage of foreign currencies.

The dollar rises


Xuan went to her HCM City bank on August 3 to buy dollars for an upcoming trip abroad, recounts Saigon Tiep thi.  The bank told her that it has stopped selling dollars to individual clients.


At another big commercial bank, Xuan was told that branches have been instructed to halt selling dollars.  Would Xuan like some yen or euros instead, she was asked.


Even the HCM City Branch of state-owned Vietcombank told Xuan that it has curbed selling dollars because it does not have enough dollars to satisfy all clients.


Finally, Xuan had to purchase dollars on the black market, paying 19,260 dong per dollar, or 160 dong more than the price quoted by commercial banks.


The General Director of a bank told Saigon Tiep thi that he can only purchase enough dollars to meet the needs of some of his best clients.  Others must queue up.


Companies in the south report that it has become difficult again to buy dollars, and that banks tack on an additional fee of one percent.  It is reminiscent of what happened some months ago, when the dollar supply was seriously short. With the additional fee, the dollar cost rises 19,290 dong per dollar, which is nearly equal to the black market price.


Two months ago, the black market price fell to the price quoted by commercial banks, 19,100 dong to the dollar, but the gap between black market and bank price now has widened again.  Wholesale black market vendors are quoting 19,210-19,260 dong per dollar.


Central bank says Vietnam does not lack dollars


Meanwhile, the State Bank insists that it has been successful is managing the foreign currency market over five months since it widened the trading band.  The dong/dollar exchange rate had been stable, it told Saigon Tiep thi.  After covering the current account deficit through June, the nation’s foreign exchange reserves, according to the State Bank, reached $3.5 billion.


In early July 2010, the State Bank declared that the foreign currency liquidity is high enough to satisfy all the demand for foreign currencies of the national economy.


As such, Vietnam does not actually lack dollars. Banks still have dollars to sell to clients and to lend. The problem is that those who need dollars have to pay more.


ACB Securities Company says that the biggest worry of foreign investors at this moment is the instability of the dong/dollar exchange rate.  A buyer wanting to guarantee he has dollars twelve months from now must pay 21,357 dong per dollar.  That’s a sharp increase of 500 dong per dollar over the end of June and a strong indication that the market expects the dong to depreciate further.  If the current situation continues, ABC frets, foreign investors may withdraw capital from Vietnam’s stock market, because the profit they expect to gain from investment may not offset expected losses in the dong’s value.


The State Bank says that it will continue a policy of stabilizing the dong/dollar exchange rate.  SBV Governor Giau, answering questions from the press, affirmed that all macroeconomic indicators are healthy.  Though registered FDI has not increased, actual FDI disbursements are up by 1.6 percent year over year.  Further, remittances from overseas Vietnamese have risen by a large 24.6 percent in the first six months of 2010.  The nation has also experienced a surge in foreign portfolio investment, netting $300 million so far this year.

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