Vietnam has decided to widen the trading band to plus or minus 5 per cent from 3 per cent from March 24 to let its currency, the dong, depreciate effectively to give a boost to the economy, which is forecast to slow down amid the global recession.
“The move is aimed at boosting flexibility of the economy, exports, closely following demand and supply of the forex market,” the State Bank of Vietnam, the country’s central bank, said in a statement.
“It will also help local firms be proactive in production plans,” the SBV noted.
This is the fifth time the SBV has adjusted the currency band since early 2008.
“The decision by the SBV will help cool down the forex market as exporters preferred keeping dollars to reselling to commercial banks due to low forex rates,” Nguyen Thanh Toai, vice general director of the ACB Bank said.
Meanwhile, Tran Duc Lich, chief economist and dean of the Ho Chi Minh City Economic Institute said this move is technical to help boost flexibly of the forex market.
Domestic analysts said the dong is overvalued against the dollar as the greenback is depreciating fast.
The VND/USD rate is quoted at VND16,980 by the SBV on March 24 while Vietcombank is offering to buy at VND17,590 and sell at VND17,770.
In the black market, traders are buying at VND17,700 and selling at VNd17,900, and traders predict the exchange rates at VND18,500 by year-end.
Minister of Planning and Investment Vo Hong Phuc told lawmakers late Saturday that GDP growth will likely slow to 3.1 per cent in the first quarter, sharply down from 7.4 per cent in the same period of 2008.
In the first quarter, Vietnam reports a trade surplus of US$1.647 billion thanks to sharp increase in gemstone and gold exports, which were valued at US$2.29 billion, and its total exports value edged up only 2.4 per cent, GSO said. (SBV, GSO March 2009)
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