Dollar keeps sliding in Vietnam as foreign investment boosts supplies

By Thanh Xuan, Thanh Nien News

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Stacks of US dollar bills arranged at a bank in Ho Chi Minh City. Photo: Dao Ngoc Thach Stacks of US dollar bills arranged at a bank in Ho Chi Minh City. Photo: Dao Ngoc Thach


The US dollar has fallen quite sharply in Vietnam this month as ample supplies, boosted by strong foreign investment flows, come at a time when dong savings have become more attractive. 
Following the central bank's fourth cut this week, the mid-point rate for the dollar dropped to a five-month low of VND21,881 on Friday, compared to VND21,910 on Monday.
Since banks are allowed to trade the greenback within 3 percent above or below the daily-issued reference ate, the country's biggest lender Vietcombank reduced its rate by 0.6 percent to VND22,255 on Friday. That was down 1.2 percent from early this month.
As foreign investors have pumped more money into Vietnam, the forex market has been seeing a surplus on the supply side, which in return has caused the dollar to fall continuously, a representative of HSBC Vietnam told Thanh Nien.
Foreign investors disbursed $800 million in the January 1-20 period, up 23.1 percent year-on-year, according to figures released by the Foreign Investment Agency.
Industry insiders said major M&A deals, particularly the $1.1 billion transaction between Thailand's Singha Group and local consumer goods group Masan, also increased supplies of foreign currencies. In the record deal signed the end of last month, the Thai group bought stakes of 25 percent and 33 percent in two of Masan's subsidiaries.
Overseas remittances, which often come in most strongly in January, the month before the Tet Lunar New Year, are also expected to rise sharply this year, said Nguyen Hoang Minh, vice director of the central bank's Ho Chi Minh City office.
The central bank has recently taken measures to curb dollar hoarding. It cut interest rates to zero on dollar deposits by businesses in September and then by individuals in December.
Reports from banks showed that their dollar deposits have declined since the last quarter, as many customers have switched to dong savings accounts to enjoy higher interest rates of 5-6.5 percent.
However, speaking to news website Dau Tu on Thursday, an expert with Bao Viet Securities Company said the dollar decline is possibly temporary, as the greenback will likely strengthen and China's yuan will possibly be depreciated further.

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