No further dong devaluation, Vietnam central bank assures

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The central bank on Wednesday increased the dollar's buying price to VND21,100 from the VND20,826 it had maintained since late June, asserting there it would not repeat last June's dong devaluation.

The greenback's selling price has been kept at the ceiling level of VND21,246 per dollar.

The latest adjustment comes after the monetary authority weakened its dong reference rate by 1 percent to 21,036 per dollar on June 28 to support exports and help revive an economy that grew last year at its slowest pace since at least 2006.

The currency is allowed to diverge by 1 percent from the benchmark rate, which had, prior to the latest devaluation in June, been set at 20,828 since December 2011.

Responding to the latest increase in the dollar's buying price, economist Nguyen Tri Hieu said it was a common transaction of the central bank. It can increase the dollar's buying price to be able to purchase big volumes and bolster foreign exchange reserves, recently used for the purpose of importing gold, he said.


The central bank, the nation's sole gold importer, has held gold auctions since March, selling 1.17 million taels, or about 44 tons, according to bank data. Bidders are mostly banks and jewelers.

The dollar price increase was also aimed at halting the trend of a decrease in the exchange rate, which had negatively affected Vietnam's export earnings, Hieu said.

At commercial banks, the exchange rate stood at VND21,040-21,060 per dollar, compared to VND21,080-21,090 per dollar early this week.

The higher exchange rate will help increase export values if they are calculated in the local currency, as exporters can convert the dollars they earn from their shipments to Vietnamese dong in the domestic market, he explained.

The central bank has said it has no plans for a repeat of last month's dong devaluation, the first since 2011, and has pledged to support the currency.

"The State Bank of Vietnam affirms that it isn't going to adjust the dong-dollar exchange rate and will take determined measures to stabilize the rate," Deputy Governor Le Minh Hung said in a note posted on the State Bank of Vietnam's website. "That includes strong intervention," he said, adding that foreign-exchange reserves "are at high levels."

The CEO of Eximbank, Truong Van Phuoc, said the central bank is likely to keep the exchange rate unchanged until the end of this year because of a big balance of payment surplus. The central bank has forecast the country will enjoy a $5 billion balance of payments surplus in 2013, easing pressure on the dong.

However, economist Hieu said that if the exchange rate in the black market increases, the central bank will need big foreign currency reserves to intervene. Meanwhile, it also needs to use the reserves to import more gold for its auctions. "With the current national foreign currency reserves, it will not be easy for Vietnam to carry out both tasks at the same time," he said.

Based on economists' estimates and government data, Vietnam's foreign reserves were estimated at around $26 billion at the end of 2012. The exact amount of foreign exchange reserves is not publicly released in Vietnam.

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