Vietnam Widens Dong/Dollar Trading Band to Boost Exports

The State Bank of Vietnam, the country’s central bank, Thursday [Nov 6] decided to widen the daily trading band of dong against U.S. dollar to minus and plus 3 per cent, effective from Friday [Nov 7] in order to boost exports, a driver of Vietnam’s GDP growth amid the global financial crisis.

 

SBV said the decision is flexibly and closely reflecting demand and supply of greenback on the local market, boosting exports while narrowing trade deficit, and ensuring reasonable GDP growth rate in line with the domestic and international situation. Vietnam’s central bank also allowed forex agencies to fix bid/ask rates of spot dong against dollar within the trading band of minus and plus 3 per cent.

 

This is the fourth time this year SBV has raised the daily trading band of dong against dollars to minus and plus 3 per cent from 2 per cent (from June 27), from 1 per cent (Mar 10) and 0.75 per cent (in early 2008).

 

Nguyen Phuc Thanh, CEO of Vietcombank, which accounts for a majority forex market share in international trade, SBV’s decision is aimed at three targets: bringing the official forex rate closely to the market, better serving the country’s economic integration and accelerating exports and production.

 

“Had SBV not widened the trading band, the country’s economy will be hurt,” Thanh commented.

 

“Vietnam’s exports are being impacted by the global financial turmoil, exports prices are dropping and exports orders are shrinking,” Thanh analyzed.

 

To avert impacts of the global financial crisis, central banks of many countries around the world have cut rates. So far this year, U.S. dollar has gained 10 per cent against euro, 5.51 per cent against Thai baht, 3.11 per cent against Singapore dollar, 7.02 per cent against Malaysia’s ringit, analysts said.

 

Vietnam has recently decided to loosen the monetary policies by allowing the central bank to cut benchmark rate to 12 per cent per annum and slashed the compulsory reserves to boost production on fear of deflation in the coming months.

 

Vietnam’s agriculture products exporters are being hurt and in a tough fights against export rivals from Thailand, Malaysia, India, Brazil, Colombia… as prices of rice, coffee, rubber, cashew nut…on the global market are keeping dropping and these countries devalued their moneys between 13 per cent and 33 per cent.

 

Currently, the dong against dollar rate at the local interbank market is quoted at VND16,511, at VND16,831-VND16,841 by commercial banks.

 

The dong/dollar rate jumped to VND17,000 strongly in recent days on fears that foreigners are withdrawing their cash out of Vietnam’s financial market, which is forecast to be maintained at the end of the year, analysts analyzed. (SBV, Vietnamnet, VNA)