The dollar continued its decline in Vietnam Wednesday as supply on the local market increased.
On Thursday, the so-called "black market" rate was 18,980/19,010 dong per dollar, the lowest in more than a year, local news website VietNamNet reported.
The unofficial rate this week, for the first time ever, even fell to lower than the interbank dollar-dong exchange rate. Vietcombank, for intance, sells the dollar at 19,020 dong.
Le Xuan Nghia, vice chairman of the National Financial Supervision Commission, said many businesses have switched to dollar loans to avoid high dong lending rates. Dollar-denominated loans expanded 14.07 percent in the first quarter, compared to a 0.57 percent growth in dong loans, he said.
Importers use dollar loans to pay for goods while exporters also sell their dollars for domestic payment, which is a main reason behind the sharp rise in dollar supply, Nghia said.
Analysts said as dong deposit rates are much higher than dollar rates, people no longer want to keep the greenback.
An expert said now is a good time for the central bank to increase its forex reserves. The declining trend of the dollar may not last long and there should be long term measures to strengthen confidence in the local currency, he said.
Vietnam devalued the dong in February for the second time in three months. The International Monetary Fund said last month the Vietnamese dong does not appear to be a problem at its current levels.