Vietnam's foreign current market has shown signs of stabilizing after the government increased the dollar supply to lower the greenback's price.
For more than six weeks as of last Friday, the State Bank of Vietnam's inter-bank dollar prices stood still at VND18,544. The selling price at commercial banks was VND19,100 but the buying price recently dropped to VND19,050 at Vietcombank (Bank for Foreign Trade of Vietnam). The corresponding price at Vietinbank and Asia Commercial Bank was VND19,060 while Sacombank is now selling dollars for VND18,990.
The overnight inter-bank rate has also dropped from 0.56 percent two weeks ago to 0.43 percent the previous week.
Nguyen Hoang Minh, deputy director of the Ho Chi Minh City office of the State Bank of Vietnam, said these were all signs that proved the market had "stabilized." He said the decision to raise the inter-bank rates on February 11 was the key factor in the development, though he cited other reasons for the change as well.
Commercial banks in the city said they have balanced foreign currency sales in the first quarter by purchasing more than $12.3 billion and selling $12.2 billion.
The state bank policy of reducing foreign currency reserve rates at banks from 7 percent to 4 percent has also given banks more active dollar notes in cash at hand.
And it's easier for them now to buy dollars from companies, which no longer need the dollars they wanted in January and early February to import goods for the traditional Lunar New Year.
Vietnam's trade deficit in the first quarter this year was $3.62 billion, less than half the figure of the same period last year.
Vietnam's government has been asking companies to sell dollars to banks to ease the shortage and meet currency demand. Vietnam Southern Food Corporation in HCMC supplied some hundreds of millions of dollars after exporting 150,000 tons of rice at $480 each to the Philippines early this year.
Many state-owned commercial banks have raised the foreign currency deposit rates from 1 percent to 4 percent a year. The rate was 4.6-4.8 percent at Seabank and 5 percent at the city-based Housing Development Bank HDB.
As the corporate dong deposit rate is around 15 percent a year, many firms want to save money in dong instead. And they have borrowed in dollars as Vietnam's banks are lending dong at 18-20 percent and dollars at 6-8 percent.
The dollar prices on the black market have been also dipped to around VND19,180 late last week.
"[There are] a lot of buyers, but also a lot of sellers," said the owner of a foreign currency exchange shop in HCMC's District 1. The owner asked not to be named.
Minh from the central bank said there would also be more dollar notes entering the economy via returning overseas Vietnamese. He estimated they would add a total of US$964 million to the HCMC market during the first quarter, up 18 percent year-on-year.