Time to adjust Dong/Dollar exchange rate

It’s time to adjust dong/dollar exchange rate

Posted: 04 Jul 2012 05:06 AM PDT

LookAtVietnam – Some bankers have urged the State Bank of Vietnam to
regulate the dong/dollar exchange rate in a flexible way to ensure the
harmonization of different economic goals, instead of trying to stabilize the
exchange rate somehow.

The dong/dollar exchange rate has been fluctuating regularly since early June.
When the dollar price increased slightly in early June, this did not catch the
attention of the public, because the central bank committed at the beginning of
the year that the dong will not devaluate by more than 3 percent by the end of
the year.
Experts also said on local newspapers that they did not think the dollar price
increase would continue in the context of the profuse foreign currency reserves
and kieu hoi (overseas remittance).
However, the dollar price has increased continuously since then. The dollar
price once climbed to 21,000 dong per dollar. Meanwhile, worries have been
raised among businesses that the dollar supply would be short in the time to
come. The dollar demand is believed to increase towards the end of the year,
when businesses need dollars to make payment for imports. Besides, the dong has
become more attractive when the dong interest rates have been lowered by the
State Bank.
Thoi bao Kinh te Vietnam has quoted a senior executive of HSBC as saying that
the exchange rate may not fluctuate too heavily in the third quarter of 2012,
but the dollar would surely be appreciating in the fourth quarter of the year.
Businesses have been told to keep cautious with the stabilization of the
dong/dollar exchange rate for a long time. In general, businesses do not use any
“defensive measures” which help them deal with the exchange rate fluctuations;
especially, they see the dollar price stable for a long time.
The businesses would only hurry to take actions when the dollar prices soar and
influence their business. This would cause uncertainties to the whole market.
Trinh Quang Anh, Director of the Economics Research Center of Maritime Bank said
on Dau tu that it’s now the time to adjust the dong/dollar exchange rate.
Anh said that the State Bank has been succeeding in its effort to stabilize the
exchange rate and the activities of the foreign currency market, improve the
foreign currency reserves and restore people’s confidence on the local currency.
However, this does not mean that the central bank would have to strive to the
same goal for ever.
He went on to say that the central bank should take actions right now in order
to avoid the overly hard pressure on the exchange rate which may occur by the
end of the year, when the dollar demand increases.
A banker who asked to be anonymous, also said it would be better if the central
bank begins devaluating the dong/dollar exchange rate slightly right now. The
exchange rate gradual adjustment would help make businesses get adapted to the
new circumstances and avoid the shocks to be caused in case the exchange rate
increases sharply at the end of the year.
The banker said that when the dong interest rates decrease, the adjustment of
the exchange rate would be necessary to harmonize the demands on the market.
If the central bank still holds out the nominal exchange rate for too long, thus
generating big gaps between the nominal exchange rate and actual exchange rate,
this would prompt people to speculate dollars, which would make the dollar fever
more serious by the end of the year.
Dau tu has quoted Truong Dinh Tuyen, a member of the advisory council for
national monetary policies, as saying that curbing the exchange rate fluctuation
within 3 percent this year proves to be a possible mission. However, the
government should think about whether to try to do that.
“When the dollar demand was low, we once asked to loosen the trading band.
However, the State Bank still tried to make the exchange rate stand still,” he
said.
According to Thoi bao Kinh te Vietnam, Vietcombank and Eximbank quoted the
dollar prices at 20,850-20,910 dong per dollar on July 2.
C. V

Rail fares to increase by 12 percent | Look At Vietnam

Rail fares to increase by 12 percent

May 18, 2012

Train fares will increase by 12 per cent on an average from May 15 to September 4, 2012, announced Vietnam Railways on May 14.

For instance, the
price of a soft bed in an air-conditioned coupe on the North-South train
route will go up by 13 per cent while a hard seat without
air-conditioning will go up by 15 per cent. Other seats will go up by 12
per cent.
Moreover, fare for a soft
seat in an air-conditioned carriage on the high quality train SE3/4 will
be VND1,200,000 (US$57.6) and will be different for carriages on the
rest of the train.
The lowest price on the Thong Nhat train TN1 will be VND530,000 and the highest VND1,300,000.
Standing seat prices,
passengers’ premium, luggage shipping rates and free discount tickets
for beneficiaries of social policies apply under the current rules.
During this time, the
company will not discount for collective tickets. Moreover, it will not
conduct deduction for returning tickets or changing tickets which are
around 20 per cent.
The Railways announced
reduction in prices for beneficiaries of social policies as follows:
people about sixty years of age will enjoy a 20 per cent discount; hero
mothers will get a 90 per cent reduction while wounded soldiers and
disadvantaged students from special schools will be offered 10 per cent
reduction.
Children less than five
years of age with height under 1.05 metres will enjoy exemption of fares
while children from five to 10 years of age will get a 50 per cent
discount.

Vietnamese parents now tend to award children with money | Look At Vietnam

Vietnamese parents now tend to award children with money

April 13, 2012

LookAtVietnam – A debate has been raised by VietNamNet’s readers about
whether to give money to children to reward for children’s efforts.

A lot of Vietnamese parents nowadays believe that giving money to children is
the best way to ask the children to do the things they want.
When asking the son, a 3rd grader, to go to the shop near his home to buy a pack
of cigarettes, Kien in Hoai Duc district in Hanoi, said: “Go and buy. I will
give you 5000 dong.”
The boy immediately left for the cigarette shop, without any words. 5000 dong is
the sum of money he always receives after fulfill a thing as requested by the
parents. Therefore, he believes that paying money is a must when someone is
served.
When asked why Kien promised to give the boy 5000 dong, Kien smiled and said
that if he had not offered the “award,” the boy would not have left for buying
cigarettes for him. As such, Kien now can earn his money by providing services
to his father.
Hue, a mother in Thanh Tri district, also thinks that it would be better to
encourage children with money. Every time when her child cries or refuses meals,
she would promise to give the child money.
“My child suffers from the anorexia. Therefore, I have to promise to give her
2000 dong to persuade him to eat meat,” she said. “Sometimes I have to give 5000
dong.”
When asked if this is a good way to use money to educate children, Vietnamese
parents all have a common voice that this should not be an education method.
Surprisingly, both Kien and Hue do not agree to the education method. However,
they still use the way every day to seek their wishes fulfilled.
Educators have warned the parents who try to use money to educate children that
the cash bonus would “harm” the children. They would always bargain with parents
about the sums of money the parents need to give them when asking them to do
something. Especially, they would not understand the value of the money, and
that their parents can only earn money from sweated labor.
Ha, the man in Quoc Oai district in Hanoi, related that one day, she asked a
niece to go buying a pack of cards for the guests to play after the family
party. As the niece said she did not want to go under the sun, Ha gave 2000 dong
to the girl, saying that this is the award for her.
However, to Ha’s surprise, the girl did not accept the “gift.” “You cannot buy
anything with 2000 dong now,” the girl said. Finally, she only left for the pack
of cards after Ha gave her a 5000 dong bank note.
“Instead of using money to stimulate children, why don’t parents think of
bringing the kids to the parks or buying the toys they like?” Huong, a parent
whose child goes to the Song Phuong Primary School questioned.
In the eyes of international labor managers, Vietnamese people keep a
combination of odd features: they are both frugal and squandered.
While the students in 1990s were told that money would associate with crimes,
the students in the 21st century believe that everything can be bought with
money, while they would not go to school if the parents to not give them money.
Nowadays, in many families, money is given to children when they fulfill normal
duties such as doing home exercises, cleaning rooms, washing dishes or taking
care for younger brothers.
Nguyen Hien

The new iPads see prices falling dramatically | Look At Vietnam

The new iPads see prices falling dramatically

April 6, 2012

LookAtVietnam – The price of The new iPad has been decreasing dramatically,
by 4 million dong just two weeks after they hit the Vietnamese market.

The new iPad prices on the decline
The price of the new product has plunged so sharply that it is now just 2.8
million dong more expensive than iPad 2.
High-technology product players in late March once got so surprised when
distributors slashed the sale prices by 3 million dong per product in late
March. However, this was not the last price decrease wave.
On April 3, 2012, private shops slashed the sale prices further. Nhat Cuong
distribution chain in Hanoi, for example, has reduced the sale price by another
100,000 dong for 16GB and 32GB to 15.79 and 18.69 million dong, respectively.
Meanwhile, a sharper price decrease of 400,000 dong has been quoted for the 64GB
product, which is now selling at 20.59 million dong.
Other private shops such as DigiWord, iShop, are quoting similar prices.
According to Buu Dien newspaper, TechLand is now quoting the lowest price at
15.5 million dong for 16GB. Meanwhile, 32GB and 64GB versions are selling at
18.20 and 20.39 million dong, respectively.
A lot of shops are running sales promotion programs to attract more buyers.
DigiWorld Hanoi and Nhat Cuong are giving free SIM 3G to clients, while offering
price discounts to the clients who buy additional accessories.
Most of the shops in Hanoi and HCM City said they are not interested in the
product version with Wi-Fi connection only. Nguyen Toan, Manager of
muabaniphone.vn, the distributor that stated that it brought the first new iPad
to Vietnam, said that the Wi-Fi 16GB version is priced at 12.37 million dong.
Meanwhile, two weeks ago, it was sold at 13.7 million dong.
The salesmen of Nhat Cuong and TechLand said that the Wi-Fi version of The new
iPad has the same price with the iPad 2 3G. Therefore, consumers would think
twice before deciding to buy The new iPad Wi-Fi version.
Prices would decrease further
The continued price decreases of The new iPad in Vietnam are foreseeable.
Experts, after analyzing the new features of The new iPad, said before the
products hit the Vietnamese market that the products would not be favored.
The comments on some high technology product players’ forums such as Tinh Te,
VOZ or Handheld showed that The new iPad has stronger configuration than iPad 2,
with camera 5.0MP, high resolution screen 2.048 x 1.536, more than 3 million
pixels, allowing to well watch Full HD standard high resolution video clips, and
more powerful graphics processing capability with two duo core Cortex A9 chips,
but these are not the interesting features in the eyes of consumers.
The new iPad has a big advantage that it is equipped with 4G connection.
However, the advantage has no use in Vietnam, where no mobile network has
provided 4G services.
As such, spending several million dong more to buy The new iPad instead of iPad
2 is considered an “unreasonable decision” for the majority of consumers.
The information about the disadvantages of The new iPad appeared more and more
on information technology forums has also made the sales of the products slow
down.
With the “negative marks” for The new iPad and the low demand on the high
technology production market, traders think that the products would see the
prices drop further by April 2012. Especially, the products would be several
millions of dong cheaper than now.
Source: Buu DienThe new iPads see prices falling dramatically | Look At Vietnam

The New iPads cheaper than expected in Hanoi | Look At Vietnam

The New iPads cheaper than expected in Hanoi

March 20, 2012

LookAtVietnam – The sale prices of the third generation iPad products in
Hanoi are 2.3-2.5 million dong lower than the initial estimates.

Just seven hours after iPads hit the market in Singapore, the first new iPads
appeared in Vietnam which were imported through unofficial channels (the
products were either carried to Vietnam by travelers, or imported from different
sources, not from the genuine manufacturers).
The first shop which had the new iPads for sale was CellphoneS at No. 117 Thai
Ha Street in Hanoi, now selling at 19.3 million dong for 16GB product with 3G,
21.3 million dong for 32GB and 23.5 million dong for 64GB.
The sale prices of iPads quoted by the private shops in Hanoi do not show big
differences. Techland Shop on Hang Khay Street, for example, quotes the price of
18.9 million dong for 16GB, 21 million dong for 32GB and 23.1 million dong for
64GB product.
According to So hoa (digitalization) newspaper, the prices of the new iPad are
“very reasonable” if noting that the first iPad 2 was priced at 30 million dong
when it first appeared on the Vietnamese market.
However, the current prices in Vietnam are still much higher than the original
prices. In Singapore, Apple Store now sells 16GB iPad with 4G at 13.7 million
dong, including tax. In 2011, an iPad 2 was sold at 14.3 million dong, when the
price got stabilized.
Buu dien newspaper has also reported that the sale prices of iPad 3 of between
18.8 and 23 million dong for 4G models are “acceptable” and “not shocking.”
In HCM City, MuabaniPhone.vn shop stated that it owned the first new 16GB wi-fi
iPad in Vietnam on March 13. The owner of the shop said that the product was
sourced from the US which he bought from a foreigner. The shop owner said on Buu
dien on March 17 that the shop was selling wi-fi products at 13.68 million dong,
15.68 million dong and 17.68 million dong for 16GB, 32GB and 64GB, respectively.
Meanwhile, it has not announced the expected sale prices for 4G models.
Buu dien has also quoted high technology experts as saying that the above prices
are not overly high for a product which is catching the special attention from
the technology community like iPad.
Despite the launching of the next generation iPads on the market, iPad 2 prices
remain unchanged, though analysts predicted before that iPad 2 prices would
plummet once iPad 3 appear.
However, the well-known private shops such as DigiWorld Hanoi, PhoneGee, Nhat
Cuong, TechLand and iShop on March 16 all still quoted the unchanged prices at
12.99 million dong for iPad 2 1GB 3G, and 14.89-15.2 million dong for 32GB 3G
products.
The shop which is believed to offer the lowest sale prices now is
MuabaniPhone.vn, where iPad 2 16GB 3G is selling at 11.99 million dong, iPad 2
32GB 3G at 13.99 million dong and iPad 2 64GB at 15.9 million dong.
However, analysts believe that if the new iPad are imported in big quantity to
Vietnam, the prices of iPad 2 will decrease in two or three weeks.
However, other local newspapers have reported a different situation. Ngoi Sao
online, for example, late last week reported that the iPad 2 prices have dropped
sharply to 9 million dong, or 500,000 dong lower than the price quoted prior to
March 8.
The newspaper quoted high technology product distributors as saying that the
demand for iPad 2 is not big in Vietnam. Those, who wanted iPad 2, bought the
products already, while those who want to buy now, would rather to wait some
more days to get better prices.
C. V

Dollar hits new high in Vietnam | Look At Vietnam - Vietnam news daily update

Dollar hits new high in Vietnam | Look At Vietnam - Vietnam news daily update: "The dollar has gained around VND1,000 over the past week

The US dollar surged to a record high of VND22,200 on the unofficial market on Friday, one week after the central bank devalued the dong by 9.3 percent.

News website VnExpress reported that even though market activity remained almost the same without any significant changes in supply and demand, the greenback continued its climb against the local currency. The dollar has gained around VND1,000 over the past week.

The central bank’s devaluation last week aimed to narrow the gap between official and unofficial rates.

The official rates at commercial banks on Friday, however, were still far behind the black market rate of VND22,200. Vietcombank, for instance, quoted the dollar at VND20,885.

Le Duc Thuy, Chairman of the National Financial Supervisory Commission, was quoted in a Lao Dong (Labor) newspaper report as saying that the recent devaluation may be the only adjustment in 2011.

Thuy said he saw no reason for another devaluation of the dong through the end of the year.
Source: Thanh Nien

Billions of Dong for Phone Numbers (lucky)

Vietnamese believe that using good numbers they will be lucky in life and business. Based on this idea, many people pay billions of dong to own special phone numbers to get luck and to show off their “rank”.

A shop sellings SIM in Hanoi.

According to some online forums, a man recently paid $200,000 to buy the cell phone number 0903456789 (of MobiFone network). This number is expensive because 090 is the oldest network code and 3456789 is the best chain of forward numbers among ten-digitphone numbers. It is said that the price for this number is much higher now.

A SIM shop recently offered this number 01666666666 (of Viettel) at 2.5 billion dong ($132,000). This is a special phone number because 16 means luck in business, nine six numbers mean being luck forever.

VinaPhone’s number 0916888888 is fixed at 888 million dong ($46,700). It is explained that 091 is among the oldest network code in Vietnam, 168 means getting rich, and 888888 means good fortune.

People call this phone number as “Dream of Life”. It is forecast that the price of this phone number will exceed over 1 billion dong very soon.

At present, two of seven mobile networks in Vietnam have launched programs to sell “special phone numbers” to customers, Viettel and VinaPhone.

Geomancer Nguyen Tuan Kiet from the Vietnam Geomancy JS Company explained that each chain of numbers has a “soul” like the name of a person. According to geomancy, the names or numbers have influences in terms of Yin and Yang and five basic elements to the owner’s life.

He recommended people choose phone numbers based on geomancy. At present, numbers 8, 9 and 1 are considered good ones and Kiet recommended numbers with 8, 9 and 1 at the bottom.

According to Kiet, numbers that benefit users must be fit the users in terms of five basic elements. For example, if a person was born in 1978, he belongs to element fire so hisphone number should not include number 1.

Therefore, good numbers depend on the user’s basic element.

PV

2010 target per income Vietnam US$2100

The Ministry of Planning and Investment is targeting an average income of US$2,100 per person a year by 2015, nearly double that of the 2010 target.
This was revealed last week at an international conference on the nation’s socio-economic development plans for the 2011-15 period.

Viet Nam’s per capita income has recently risen to $1,200. This is expected to improve further next year, moving the nation from the ranks of developing countries to the group of average income countries.

Over the next five years, the ministry targets an annual GDP growth of 7-8 per cent, along with a reduction of 2 per cent per year in the poverty rate and budget deficit maintained at 5.1 per cent of GDP.

Accordingly, national GDP will reach VND4,170 trillion ($200 billion) by 2015, 18-19 per cent of which will be contributed by agriculture, forestry and aquaculture sectors; 40-41 per cent by industry and construction and 40-41 per cent by the services sector.

Inflation of 2015 will be kept under a safe threshold, and labour productivity will increase 1.5 per cent over 2010.

Deputy Minister of Planning and Investment Cao Viet Sinh said over the next five years, Viet Nam will focus on developing human resources, building infrastructure, and implementing administrative reforms towards making a major breakthrough in socio-economic development.

VietNamNet/Viet Nam News

Vietnam's Devaluation Alarms Rival Exporters

Vietnam's Devaluation Alarms Rival Exporters - WSJ.com: "Vietnam's decision to devalue its currency raises tensions across Asia as the region's export-driven economies jostle for an edge amid a slow recovery in orders from the U.S. and Europe.

Vietnam shaved 5% off the value of its currency, the dong, on Wednesday, its third devaluation since June 2008. It also increased interest rates by one percentage point, to 8%. The moves were driven primarily by domestic concerns, including a need to combat speculative pressure that has weighed on Vietnam's economy for more than a year.

View Full Image
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Agence France-Presse/Getty Images

A factory worker in the northern Vietnamese province of Vinh Phuc helps assemble a motor scooter. Vietnam's currency devaluation this week gives it an edge over other Asian exporters.
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The devaluation makes Vietnam's manufactured goods cheaper than those of many other Asian countries, improving its relative position in global trade. That puts Vietnam in the same camp as China, another country that has kept its currency weak compared with its neighbors, sparking complaints from manufacturers and leaders in the region who want China to let its currency, the yuan, rise.

Thai Finance Minister Korn Chatikavanij, whose country has spent at least $15 billion this year to slow the appreciation of its currency and keep it competitive with the yuan, said in a phone interview Wednesday that Thailand could see some 'marginal impact' in low-margin export industries such as textiles after Vietnam's devaluation, but that he was hopeful the broader Thai economy wouldn't be buffeted too much.

Industry leaders, however, are worried. 'The Thai baht is rising too quickly in comparison with some of our competitors, and we in the private sector are telling the government that it is rising too quickly -- but it seems they aren't doing anything,' said Thamrong Tritiprasert, chairman of the footwear section of the Federation of Thai Industries, a trade association.
[vietnam currency]

He said it wasn't just Thailand's shoe industry that would suffer because of Vietnam's devaluation, but potentially all industries. The two countries compete for markets for agricultural products such as rice.

Economists say Vietnam's move is unlikely to trigger copycat devaluations elsewhere. Vietnam's economy is relatively small, and most Asian countries are more concerned with currency policies in China -- a much bigger rival than Vietnam.

But Vietnam's actions matter a great deal in some industries, including textiles and agriculture, and could accelerate a longer-term shift of manufacturing to the country, which already has the advantage of a large and low-cost labor force. Vietnam's exports grew faster in percentage terms than other Asian economies' in recent years, and the country attracted more foreign direct investment in 2007 than its much-larger rival Thailand. It is among the world's top exporters of rice, coffee and shrimp.

Vietnam has economic problems, though, many of which contributed to the decision to devalue. In sharp contrast to many other emerging markets, whose currencies have gained value against the dollar this year, Vietnam continues to face severe downward pressure on its currency, in part because it is one of Asia's only economies with both a fiscal budget deficit and a current-account deficit.

Vietnam's problems stem from years of rapid expansion from 2000 to 2007, when gross domestic product grew an average of 7.5% a year, making the country a darling of global investors. Policy makers were unable to manage the massive inflows of capital, and inflation began, reaching a peak of 28% in August 2008 and threatening an economic crisis.

The global credit crunch helped to ease inflation by depressing oil and food prices. But it also knocked out much of the foreign direct investment on which Vietnam had come to depend, and exports slumped. The trade deficit ballooned, reaching $10.2 billion in the first 11 months of the year, while dollar sales aimed at stabilizing the dong shrunk foreign reserves. All that -- coupled with billions of dollars in spending on economic stimulus -- added to the pressure on the dong.
video
Vietnam's Currency Moves
3:01

A decision to devalue the dong against the dollar and a hike in interest rates point to strains on Vietnam's economy. Hong Kong bureau chief Peter Stein and Asian economics reporter Alex Frangos discuss what prompted the actions.

Wednesday's devaluation, in which the central bank lowered the midpoint of the dong's daily trading range 5.16%, was an attempt to help stabilize the situation. The accompanying one-percentage-point rise in interest rates, in effect Dec. 1, was designed to make sure there will be no further depreciation.

'This time our solution is to strongly intervene,' State Bank of Vietnam Governor Nguyen Van Giau said.

Many economists say they are skeptical that will be enough to halt the downward pressure on the dong. 'The authorities are buying themselves some time with this move,' says Tim Condon, head of Asian research at ING in Singapore. But Vietnam needs the global recovery to pick up steam to boost exports and reduce the country's trade and balance-of-payments deficits before the situation can be remedied, he and others say.

Growth is still relatively strong in Vietnam, though, and the lower currency values could give a further shot to exporters. The World Bank expects Vietnam's GDP to climb 5.5% this year, compared with 6.2% in 2008."

Vietnam to devalue Currency 4% by end of year

Vietnam will probably devalue its currency 4 percent by the end of the year, as the government prioritizes boosting exports to help growth ahead of fighting inflation, ANZ predicted.

The dong is currently trading at about 17,825 per dollar, down from 17,486 at the end of 2008, according to prices compiled by Bloomberg. The exchange rate will probably drop to 18,500 by year-end, wrote Tamara Henderson, a strategist at Australia & New Zealand Banking Group Ltd., in a research note Tuesday.

“The government’s priority at the moment is to get growth back on track and deal with inflationary pressures if and when they emerge,” Singapore-based Henderson said in a telephone interview Tuesday.

Vietnam is targeting economic growth of at least 5 percent this year, up from a 3.9 percent first-half expansion, and plans to revive exports after they declined 14 percent year-on-year through August.

The State Bank of Vietnam let the currency weaken 8.5 percent last year by widening the trading band, and lowering the reference rate.

Year-on-year inflation slowed to 2 percent through August, the lowest rate since 2002. A year-long deceleration in inflation is “almost certainly” over, with price pressures rising, ANZ said.

‘Long wait’

“Concerns about inflation have already started to weigh on the dong,” Henderson wrote in the note. Further weakening of the dong should support exports during the “long wait” for US and European consumer demand to pick up, she said.

“Devaluing the currency will also make imports more expensive, which can help address trade imbalances,” Henderson said by telephone. Any devaluation will probably take place toward the end of the year, she said. By the end of 2010, the currency is likely to trade at about 19,300 per dollar, according to ANZ.

Vietnam recorded a trade deficit of US$5.1 billion in the year through August, according to estimates from the General Statistics Office in Hanoi. The shortfall has “deteriorated sharply” from a surplus in the first quarter, ANZ said.

Foreign investment, both through projects and through the country’s stock markets, is “lackluster,” Henderson wrote.

“Without an imminent improvement in global demand conditions, Vietnam’s external position will quickly deteriorate,” she wrote.

Vietnam Devalues Dong to Fight Slowdown, Help Exports

Vietnam’s central bank devalued the dong by 3 percent to help exporters after the Southeast Asian economy expanded at the slowest pace in nine years and the trade deficit widened.
The State Bank of Vietnam fixed the reference rate at 16,989 dong per dollar, versus 16,494 yesterday, according to its Web site. Policy makers maintained a currency band that allows the dong to rise or fall 3 percent a day, said Nguyen Quang Huy, director of the regulator’s foreign-exchange department.
Export growth slowed in the past three months as stagnating global economies cut demand for Vietnam’s garments and coffee and the country became less competitive after currencies in neighboring markets weakened more than the dong. Vietnam’s currency has dropped 5.5 percent this year against the dollar compared with an 18 percent slide in India’s rupee, 14 percent decline for Indonesia’s rupiah and a 13 percent slump in the Philippine peso.
“The devaluation is necessary as the government is trying to increase exports,” said Do Ngoc Quynh, chairman of the Vietnam Bond Forum in Hanoi and head of currency and debt trading at Bank for Investment & Development of Vietnam, the nation’s second-biggest lender by assets. “Other currencies in the region have considerably declined against the dollar, but the dong hasn’t dropped that much.”
The dong traded at 17,300 to 17,450 a dollar as of 3 p.m. in Hanoi, according to Bank for Agriculture & Rural Development, the nation’s biggest lender by assets.
Ensuring Stability
“The new reference rate will help increase exports, narrow the trade deficit, and also ensure the stability of balance of payments,” the central bank said on its Web site today.
At money changers, or the so-called black market, the currency traded between 17,270 and 17,350 to the dollar in Hanoi, according to a telephone directory information service, known as 1080, run by state-owned Vietnam Posts and Telecommunications. The dong has tumbled 35 percent since the end of 1994 as the central bank devalued the currency every year.
Vietnam’s VN Index of stocks fell 0.6 percent to 302.19, the lowest level in more than a week. The measure has declined 67 percent this year, the worst-performing benchmark index in Asia.
Gross domestic product grew 6.2 percent in 2008, after expanding by a record 8.5 percent last year, the government said in a statement yesterday.
Trade Deficit
Vietnam’s trade deficit widened to a record $17 billion in 2008, from $14.1 billion last year, according to preliminary figures provided by the government today.
The shortfall in the current account may grow to $12.1 billion in 2009, or 12.3 percent of GDP, from an estimated $10.5 billion this year, or 11.7 percent of GDP, according to a Credit Suisse Group research report dated Dec. 17.
“The Vietnamese dong is facing downward pressure due to the current-account deficit,” said Yuichi Izumi, an economist at Nomura Securities Co. in Tokyo. “The State Bank wants to guide the dong lower to support the export sector.”
Slower gains in consumer prices may have also provided more room for the central bank to weaken the dong. Inflation cooled for a fourth month in December to the slowest pace in nine months, with consumer prices rising 19.9 percent from a year earlier, the government said today. The rate touched 28.3 percent in August, the highest since at least 1992.
The devaluation followed five interest-rate cuts by the central bank this quarter to help bolster the economy. Policy makers last lowered the benchmark rate on Dec. 19 by the most ever this year to 8.5 percent, from 10 percent. The new cost of money became effective Dec. 22.
To contact the reporter on this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net

Greenback black market price rises by VND 50/US $1

The foreign currency market kicks off a new week with the greenback price on the black market increasing by VND 50/US $1 over late last week to VND 17,280/US $1. The gold market remains quiet, with the price going the cross-line.

Foreign currency exchange shops on Ha Trung street in Hanoi this morning quoted the dollar prices at VND 17,250/US $1 (purchase) and VND 17,280/US $1 (sale), an increase of VND 50/US $1 since the end of last week.

Today, the State Bank of Vietnam announced the inter-bank exchange rate at VND 16,490/US $1, while commercial banks quoted the prices at VND 16,983 (purchase) and VND 16,985/US $1 (sale).

In the last week, the VND/US$ exchange rate quoted by commercial banks were always at the ceiling allowed levels, hovering around VND 16,975-16,980/US $1.

The State Bank of Vietnam has affirmed that it is keeping a close watch over the market performance, while following a flexible forex management policy, which aims to control the trade deficit and stabilize the macro-economy.

As for the gold market, the prices have not increased or decreased, remaining quiet with low transaction volume. SJC gold is now selling at VND 16.55 million/tael (purchase) and VND 16.65 million/tael (sale). Meanwhile, Bao Tin Minh Chau gold prices are VND 16.52 million - 16.6 million/tael.

On ACB gold trading floor, SJC gold was traded at VND 16.1 million/tael. Only 48,260 taels of gold successfully changed hands this morning, worth VND 776 billion.

In the world, the gold price (with spot delivery) quoted on Kitco.com is $763.5/oz. The domestic gold price is approximately VND 400,000/tael higher than the world’s price.



(Source: Dan tri)

Vietnam dong drops in black market on fuel price rise

Heavy demand for dollars pushed the Vietnamese dong down by 4.5 percent in black market deals on Monday, as locals feared a fresh spurt in inflation after the government raised fuel prices by as much as a third.
Offshore forwards trading priced in a deeper fall in the dong in one-year's time compared with levels on Friday.
Selling dollars for dong is unlawful in Vietnam unless conducted by authorised dealers and banks. Many locals however approach gold shops and money changers to illicitly buy dollars.
"People want to safeguard their wealth against expected higher inflation," a black market dollar dealer said.
One dollar was changing hands for 17,500 dong on the black market, 4.5 percent weaker than 16,700 levels earlier in the day before fuel prices were raised.
"The dollar could go up to as much as 18,000 dong this week as people feel the heat from the higher fuel prices," a private currency dealer said.
In the official market, the dong was traded around 16,700 per dollar, within the 2 percent trading band prescribed by the central bank around a mid-point it sets daily. It set the mid point on Monday at 16,500 dong per dollar.
The official market and the black market had nearly converged last week, as the central bank's efforts to clamp down on the black market, intervention to defend the dong and restrictions on banks had led lifted sentiment. The dong had been transacted for as low as 19,000 in the black market in June.
But analysts expect Monday's increase in fuel prices to push Vietnam's annual inflation rate above 30 percent. It hit an annual rate of 26.8 percent in June as food prices soared and has been in double digits for eight consecutive months. Continued...

continued--->>>Vietnam dong drops in black market on fuel price rise Markets Reuters

Vietnam Dong Investors Use Black Market for Dollars

Vietnam's currency controls are forcing foreign investors into the black market to obtain dollars, aggravating declines in the world's worst-performing stock market and pushing benchmark bond yields above 20 percent.
Businesses that aren't controlled by the government pay about 7 percent more than the official rate when using the dong to buy dollars because the state gives its trading companies priority access to the U.S. currency, the World Bank said. The premium is reducing demand for the nation's stocks and bonds, according to PXP Vietnam Asset Management.
``There is clearly a shortage of dollars,'' said Kevin Snowball, a money manager at PXP Vietnam in Ho Chi Minh City, which oversees $117 million. ``If you have dollars and you want to buy dong, you will get the official rate, but if you have dong and you want to buy dollars it's a completely different story.''
Vietnam's financial markets are tumbling after the central bank raised interest rates three times this year to 14 percent to tame inflation that accelerated to a 16-year high of 26.8 percent in June. The economy expanded 6.5 percent in the first half, the slowest in at least seven years, while the trade deficit more than doubled to $14.8 billion.
Rally to Rout
Vietnam's benchmark stock index, which climbed 168 percent in the past two years as Prime Minister Nguyen Tan Dung encouraged state companies to raise cash and finance expansion, slumped 53 percent since December. Yields on five-year government bonds jumped to 20.53 percent on June 13, the highest since at least July 2006, from 8.71 percent on Jan. 3.
The dong has dropped 5 percent this year, its biggest decline since 1998, to 16,846.5 per dollar as of 4:40 p.m. in Hanoi. Traders are pricing in an 18 percent drop in the coming year to 20,500, according to offshore 12-month non-deliverable forwards. The contract was at 16,080 on Dec. 31. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars.
The official rate will fall 6.4 percent to 18,000 by the end of the year, according to Calyon, the investment banking arm of Credit Agricole SA. HSBC Holdings Plc, Europe's biggest bank by market value, predicts it will strengthen 4.4 percent to 16,140 by year-end.
`Currency Crisis'
Vietnam may suffer a ``currency crisis'' similar to the slump in the Thai baht that triggered the regional collapse in 1997, Morgan Stanley analysts said in a report May 28.
``The central bank is not providing dollars, except to some importers and some working capital for exporters,'' said Noritaka Akamatsu, a Hanoi-based economist for the World Bank. ``That's why there is some depreciation pressure.''
The State Bank of Vietnam allows the currency to trade 2 percent either side of its daily reference rate. Gold shops and street money changers offer a black market rate of about 18,000, said Akamatsu. Banks offer a similar rate by adding fees to sell dollars, he said. The rate was as high as 19,500, he said.
The dong slumped in the forwards market in May as foreign investors trapped in the bond market bet against the currency to hedge against losses, Akamatsu said.

more info-->>>Bloomberg.com: Worldwide

Tougher rule for black greenback market

The government has taken a tough stance on dollar speculation and illegal trading to cool the escalating unofficial exchange rate on the black market.
Under a government directive late last week, the central bank ordered all authorised foreign currency trading agents to sell the whole amounts of greenbacks they have bought from the public to commercial banks.The new move is part of the central bank’s efforts to prevent illegal dollar transactions through trading agents’ prohibited reselling of purchased greenbacks. The transactions are a major reason behind the record high unofficial dong-to-dollar exchange rate of 18,200 on June 4 as people rushed to the black market for hoarding purposes. In the previous week, the unofficial exchange rate was pushed up to VND17,700 per dollar, caused by people’s dong depreciation fears.“The sky-high rate was caused purely by public speculation with agents creating ‘illegal’ liquidity to the black market,” said Hoang Dinh Thang, the State Bank’s chief inspector. The escalating unofficial exchange rate has prompted the central bank to broadcast an alert to the public about black market speculation, possibly fuelled by several financial institutions.Thang said the black market dollar fever would calm once the unofficial exchange rate was curbed.

After the central bank move, the black market’s exchange rate quickly fell to VND16,200-16,400 per dollar.

Thang said the State Bank’s Inspection Department would this week investigate foreign currency trading agents’ activities in Hanoi and Ho Chi Minh City. “We will also supervise agents’ daily trading activities to ensure all foreign currencies bought [by these agents] from the public are sold to commercial banks at the end of the day,” he added. Under the Foreign Exchange Management Ordinance, agents are only authorised to buy foreign currencies from the public and resell them to commercial banks. Reselling to other buyers is prohibited. Commercial banks are now only permitted to trade dollars 1 per cent either side of the State Bank’s daily official exchange rate. On June 6, the rate was set at VND16,124 per dollar on a continuous upward trend.
However, a Bank for Investment and Development of Vietnam (BIDV) source said foreign banks’ greenback demand was considerable with some even accepting a higher rate to buy dollars from domestic commercial banks.
On June 3, 2008, some foreign bank branches offered a rate at VND17,700 per dollar to buy from local banks via the interbank market. Despite the dollar fever which has prompted a tightened control, a central bank source said the black market size was too small to affect the banking system. The source also said that Vietnam’s foreign currency reserves had not been affected despite the widening trade deficit which hit $14.4 billion over the first five months of 2008, almost equal to the level for the whole of 2007.

Vietnam's Dong may fall 10% by year end

Vietnam's dong may fall 10 percent by year-end as the government seeks a gradual depreciation to avoid a ``currency crisis'' and a sudden devaluation, according to Calyon, the investment banking arm of Credit Agricole SA.

Accelerating inflation, a widening trade deficit and a near 60 percent slide in local stocks this year have seen the currency decline for three straight months, the longest losing streak since August. The dong, which is allowed to trade within 1 percent on either side of a daily fixing rate, will weaken 29 percent in the next 12 months according to trading of non- deliverable forwards.

``The dong depreciation pressure remains strong,'' Calyon strategists including Sebastien Barbe wrote in a research note yesterday which he confirmed in a telephone interview today. ``We expect the dong to soften further to about 18,000 versus the dollar by the end of 2008.''

The dong gained 0.2 percent today to 16,242.50 versus the dollar as of 9:50 a.m. in Hanoi, according to data compiled by Bloomberg. The currency has weakened 1.5 percent in 2008. Offshore 12-month non-deliverable forwards trade at 23,000, Bloomberg data show.

The trade deficit, inflation and slowing fund inflows will weigh on the currency this year, Barbe wrote. The dong will fall to 16,500 per dollar by the end of June, 17,500 by end-September and 18,000 by year-end he said.

The government will seek to avoid a sudden devaluation of 30 to 40 percent as this will worsen inflation, widen the trade deficit by increasing the cost of imports and ``jeopardize portfolio investments and foreign direct investments,'' Barbe said in the note.

Wider Band

``If they want to implement a 10 percent depreciation in a few weeks, they could do it within the current 1 percent band,'' Barbe said in the interview. ``But if they want to signal to the market that they want more flexibility and they want depreciation, they could widen the band to 2 percent.''

The State Bank of Vietnam said in April it planned to widen the dong's daily trading band to 2 percent from 1 percent, without giving any date for the change.

Vietnam's authorities have to ability to avoid a sudden currency devaluation due to the nation's foreign-exchange reserves, ``resilient foreign direct investments, limited short- term external debts and robust export sector,'' Barbe said.

The government will raise interest rates to slow the economy and opt for a ``a controlled but significant depreciation of the dong to avoid a full fledge currency crisis,'' the note said.

Consumer prices rose 25.2 percent last month, the most since 1992, the Hanoi-based General Statistics Office said May 27. The trade deficit more than tripled in the first five months of the year to $14.42 billion from $4.25 billion in the same period a year earlier, the government said May 26.

The government this week cut its economic growth forecast for 2008 to 7 percent from 9 percent, and said curbing inflation was its top priority.

To contact the reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.net.

Vietnam scraps dong deposit rate cap

Vietnam's central bank said on Saturday it has abolished the 12-percent ceiling rate on dong deposits and allowed banks to set their own rates from next week to help increase liquidity.
The State Bank of Vietnam, the country's central bank, said it introduced a base rate at 12 percent to be applied for both deposits and lending as from May 19, from a base rate of 8.75 percent now applied only for dong loans.
As of next Monday banks can fix on their own the rates on dong deposits and lending, provided their rates would not be 150 percent above a base rate announced monthly by the central bank, it said in a statement seen by Reuters.
"With a base rate of 12 percent per year, the maximum lending by banks will be 18 percent, relatively suitable with the level of market rates and which would not cause major changes on the credit and money markets," the statement said.
Banks have now been offering lending rates of between 15-18 percent per year, the central bank said.
In February the central bank capped the dong deposit rate at 12 percent after banks sparked a heated competition to secure dong funds by offering rates of nearly 14 percent, prompting a shift in deposits from banks with lower rates.
Banks competed in securing funds because a week-long holiday in early February boosted demand for cash while the central bank was tightening monetary policy to offset double-digit inflation.
In March banks agreed to cut the cap on dong deposit rate to 11 percent as they had raised sufficient funds, but the decision lasted only about a month until late April when fund shortages re-emerged so commercial banks re-installed the 12 percent cap. Continued...

Dong 15,969 against US Dollar

Dong drops after gov’t says to control prices more

Vietnam’s dong fell after the government said it is determined to curb inflation. Bonds fell Thursday.
“The government will take every possible measure to stop consumer prices from rising and to stabilize the market,’’ Deputy Prime Minister Truong Vinh Trong said.
The dong lost 0.07 percent to 15,969.5 against the US dollar in Hanoi, the first drop in almost two weeks, according to prices compiled by Bloomberg.
Government bonds dropped Thursday, with the yield on the benchmark five-year note rising 1 basis point to 8.59 percent, according to a daily fixing price from 10 banks compiled by Bloomberg.
A basis point is 0.01 percentage point.
Source: Bloomberg