Dong to remain stable this year: analysts

TN News

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The dong will remain stable this year because of the ample foreign currency reserves and trade surplus, experts assure.

The State Bank of Vietnam chief Nguyen Van Binh said the reserves rose by $18 billion in 2012 to more than double the earlier levels.

"The pressures on the foreign exchange rate are not large," the governor said, adding the exchange rate would fluctuate by no more than 2-3 percent.

The bank has said it will keep the exchange rate stable despite some seeming weakness of late.

The dong traded at 21,100 to the dollar in the unofficial market Wednesday after falling to 21,140 last weekend. At banks the buying and selling rates were 20,860 and 20,930 compared to 20,900/21,036 on February 21.

Nguyen Thanh Toai, Hanoi-based deputy general director of Asia Commercial Bank, said the dollar strengthened late last month against the dong because some firms bought it to repay loans. But the demand was not too big, and banks had enough foreign currency to meet their demand, the banker said.

Economist Le Xuan Nghia was hopeful the exchange rate would not face serious pressure in the coming months, saying forex reserves were ample after a trade surplus of nearly $1.7 billion and FDI disbursement of above $1 billion in the first two months of the year.

The CEO of lender Eximbank, Truong Van Phuoc, said firms' dollar demand has not increased since imports are down amid piling stocks and low demand.

The central bank could keep the exchange rate stable this year but should allow the dong to weaken to support exports, Nguyen Duc Thanh, economist and head of the Vietnam Centre for Economic Policy Research, said.

The central bank kept its exchange rate virtually unchanged last year at VND20,820 to the dollar, while the dong gained 1.06 percent to VND20,815 from VND21,035 per dollar during the year.

Phuoc said Vietnam should not devalue the dong since the greenback supply and demand are now stable. Moreover, the dollar has depreciated much against other currencies, he pointed out.

Economist Tran Hoang Ngan said devaluing the dong would not help exports if global demand does not improve and the country mainly continues to do subcontracting work.

"Restructuring the economy and developing the sectors with export advantage will be much better than a devaluation.

"The exchange rate should be based on the foreign currency supply and demand."

Any devaluation would also be inflationary, he said.

The government hopes to accelerate economic growth to 5.5 percent this year while keeping inflation at 6.0-6.5 percent. Prices rose by 9.21 percent last year.

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