Vietnam dong rises to 2-month high on dollar supply; bonds gain

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Vietnam's dong advanced to a two- month high on speculation the supply of dollars has increased after the government capped deposit rates for accounts denominated in the US currency. Government bonds gained.

The country now has an "abundant" supply of dollars as individuals and companies have been selling about $10 million to $15 million a day to banks, the government said in a statement on its website yesterday. The State Bank of Vietnam imposed a 3 percent ceiling on the dollar-deposit rates banks could offer to individuals, which took effect April 13. Dong accounts offer interest as high as 14 percent.

"It's very easy for us to buy dollars these days as people sold the foreign currency to shift to dong deposits for more attractive interest rates," said Vu Thi Thu Giang, a foreign- exchange trader at Hanoi-based Ocean Commercial Joint-Stock Bank in Hanoi.

The dong gained 0.5 percent, to 20,540 per dollar as of 4:01 p.m. in Hanoi, according to prices from banks compiled by Bloomberg. That was the strongest level since Feb. 10.

The central bank fixed the reference rate at 20,693 today, compared with 20,698 yesterday, according to its website. The currency is allowed to trade up to 1 percent on either side of that rate.

Government bonds gained, with the yield on the benchmark five-year notes falling four basis points to 12.49 percent, according to a daily fixing price from banks compiled by Bloomberg. A basis point is 0.01 percentage point.

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