Photo: Ngoc Thang
The central bank pressed forward with its plan to keep the dong depreciation less than 2 percent for the whole of 2015, a deputy governor said Tuesday.
The State Bank of Vietnam "is ready to sell foreign currency for intervention to keep the exchange rate stable within the band committed at the start of the year", Deputy Governor Nguyen Thi Hong said at a press conference.
Although further dong devaluation will benefit exporters, it would badly affect producers who rely on imported raw materials, she said.
The textile industry, for instance, import 82.5 percent of raw materials, the wood industry, 70 percent and leather and footwear industry, up to 60 percent, according to Hong
A cheaper dong would also increase the country’s public debt, which is approaching the limit set at 65 percent of gross domestic product (GDP), she said.
The central bank, therefore, will continue keeping a close watch on foreign and domestic markets and intervene when necessary to stabilize the exchange rate, Hong said.
SBV on May 7 devalued the dong by 1 percent, setting its reference rate at 21,673 dong a dollar, in an effort to reduce the country's trade deficit, which may reach $3 billion in the first five months.
The dong fell further to 21,860 per dollar on Vietnam's interbank market on Tuesday, down 0.98 percent from 21,645 dong/dollar on May 7.
In January, SBV cut the rate by 1 percent to help stabilize the foreign exchange market.