Dong up a shade, but dollar demand to rise

TN News

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The dong has risen marginally against the dollar over the past week but it felt no big impact on Monday from China's move over the weekend to make the yuan more flexible, which has lifted other Asian currencies.

The dong edged up to 18,940/18,990 per dollar from 18,950/19,000 a week ago, Vietcombank, Vietnam's largest partly private lender, said in its daily quotations.

Foreign exchange liquidity in Vietnam remained high, with demand and supply well balanced on the domestic market, the central bank said in its weekly report last week.

A dealer at a foreign bank in Ho Chi Minh City, Vietnam's commercial centre, said dollar inflows from exports and foreign direct investment were good.

But bankers said demand for dollars would rise in September or October when loans, which have grown strongly this year and are often given for six to nine months, are due for repayment.

"If exports do not pick up, there may be pressure on the foreign exchange market when importers need to buy dollars for repayment," a dealer at a Vietnamese bank said.

Fixings on overnight dollar loans offered by domestic banks were unchanged from last week at 0.43 percent, but two-month lending rates edged up to 1.37 percent from 1.27 percent last Monday, reflecting a higher dollar demand forecast.

Foreign exchange loans by banks in Ho Chi Minh City, mostly in U.S. dollars, at the end of May surged 41.5 percent from May 2009, compared with growth of 0.1 percent in the same period last year against May 2008, the city's statistics reports showed.

Last Wednesday, the central bank asked banks to report their foreign exchange sales and lending to importers for repayment as part of moves to control Vietnam's trade deficit and avoid putting pressure on the exchange rate.

Banks also need to ensure their outstanding foreign exchange loans were less than their foreign currency deposits raised from companies and residents, and must tightly control the credit line and terms of each loan, the central bank said in a statement.

The first dealer said importers were closely watching exchange rate movements

"Any time the rate moves close to the critical ceiling of VND19,100, they will start buying dollars," he said, adding that the exchange rate now looked reasonable.

The central bank set the daily mid-point for Monday's dollar/dong transactions at 18,544 dong and banks are allowed to trade 3 percent either side of that, between VND17,988 and VND19,100 per dollar.

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