VNBusinessNews.com - Vietnam’s dong slumped to a record low on speculation some companies are holding onto the U.S. currency because of concern inflation will quicken
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“It’s a very worrying situation when people are turning their back on the dong and trying to keep their money in other assets,” said Phan Thi Chinh, Hanoi-based deputy chief executive officer of Bank for Investment & Development of Viet Nam, the second-biggest lender. “It will get worse unless the central bank takes some very strong measures.”
The dong slid to an all-time low of 17,860 a dollar before trading at 17,858 as of 12:15 p.m. in Hanoi, versus 17,852 yesterday, according to prices from banks compiled by Bloomberg. The currency has weakened 2.1% so far this year.
Inflation is threatening to reemerge toward the end of the year as economic growth quickens, the central bank said on July 15. The State Bank of Viet Nam has kept its key interest rate at 7% since February and set aside 17 trillion dong ($952 million) to subsidize loans and stimulate growth.
Vietnamese steelmakers this month asked the government for help in getting hold of the dollars they need to pay for imports, said Pham Chi Cuong, chairman of the Viet Nam Steel Association. Steel was the country’s third-biggest import in June.
Domestic banks can only supply about half of importers’ demand for U.S. dollars, so “we’ve been forced to source the rest from the black market at an additional cost of 5 to 6%,” said Le Phan Duc, deputy general director at Vietnam Germany Steel Pipe Joint-Stock Company, which imports raw materials from South Korea, Taiwan, China and Russia.
Dollar Supply
“We’ve had this problem for most of this year and the State Bank of Viet Nam will have to step up dollar supply or the situation will get worse,” Duc said in a phone interview from Vinh Phuc province, near Hanoi.
The central bank will keep interest rates unchanged for the rest of the year to support economic growth, Governor Nguyen Van Giau said in a statement on bank’s Web site on June 29.
Gains in consumer prices have decelerated for 10 months to 3.9% last month, the slowest since January 2004. The Southeast Asian nation’s inflation peaked at 28.3% in August, the fastest in Asia.
The General Statistics Office in Hanoi may release July figures as early as this week.
The yield on the benchmark five-year note has jumped 31 basis points this month to 9.73%, according to prices compiled by Bloomberg. A basis point is 0.01 percentage point. The securities are heading for the third monthly decline, with yields rising from 9.1% at the start of May.
“The market’s worried about inflationary pressure returning to the country,” said Tai Hui, head of Southeast Asian economic research at Standard Chartered Plc in Singapore. “It’s not just the exporters, but in general anyone who can get their hands on dollars seems to be hanging onto them.”
Standard Chartered forecasts the dong will weaken to 18,500 by the end of the year, he said. (Bloomberg)
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“It’s a very worrying situation when people are turning their back on the dong and trying to keep their money in other assets,” said Phan Thi Chinh, Hanoi-based deputy chief executive officer of Bank for Investment & Development of Viet Nam, the second-biggest lender. “It will get worse unless the central bank takes some very strong measures.”
The dong slid to an all-time low of 17,860 a dollar before trading at 17,858 as of 12:15 p.m. in Hanoi, versus 17,852 yesterday, according to prices from banks compiled by Bloomberg. The currency has weakened 2.1% so far this year.
Inflation is threatening to reemerge toward the end of the year as economic growth quickens, the central bank said on July 15. The State Bank of Viet Nam has kept its key interest rate at 7% since February and set aside 17 trillion dong ($952 million) to subsidize loans and stimulate growth.
Vietnamese steelmakers this month asked the government for help in getting hold of the dollars they need to pay for imports, said Pham Chi Cuong, chairman of the Viet Nam Steel Association. Steel was the country’s third-biggest import in June.
Domestic banks can only supply about half of importers’ demand for U.S. dollars, so “we’ve been forced to source the rest from the black market at an additional cost of 5 to 6%,” said Le Phan Duc, deputy general director at Vietnam Germany Steel Pipe Joint-Stock Company, which imports raw materials from South Korea, Taiwan, China and Russia.
Dollar Supply
“We’ve had this problem for most of this year and the State Bank of Viet Nam will have to step up dollar supply or the situation will get worse,” Duc said in a phone interview from Vinh Phuc province, near Hanoi.
The central bank will keep interest rates unchanged for the rest of the year to support economic growth, Governor Nguyen Van Giau said in a statement on bank’s Web site on June 29.
Gains in consumer prices have decelerated for 10 months to 3.9% last month, the slowest since January 2004. The Southeast Asian nation’s inflation peaked at 28.3% in August, the fastest in Asia.
The General Statistics Office in Hanoi may release July figures as early as this week.
The yield on the benchmark five-year note has jumped 31 basis points this month to 9.73%, according to prices compiled by Bloomberg. A basis point is 0.01 percentage point. The securities are heading for the third monthly decline, with yields rising from 9.1% at the start of May.
“The market’s worried about inflationary pressure returning to the country,” said Tai Hui, head of Southeast Asian economic research at Standard Chartered Plc in Singapore. “It’s not just the exporters, but in general anyone who can get their hands on dollars seems to be hanging onto them.”
Standard Chartered forecasts the dong will weaken to 18,500 by the end of the year, he said. (Bloomberg)
