Vietnam FX reserves rise, central bank may weaken dong

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Vietnam's foreign exchange reserves may have risen to between US$24 billion and $26 billion and the economy is showing other signs of improvement, but a still sluggish export outlook may prompt the central bank to allow the dong currency to depreciate, economists said on Wednesday.

Liquidity is good, the exchange rate has been stable in the past year and Vietnam's balance of international payments has a surplus of $9 billion to $10 billion, said Vu Viet Ngoan, chairman of the National Financial Supervisory Commission.

Foreign reserves have shown "a good increase", sufficient to cover 12 weeks of imports, Ngoan, who was the chief executive officer of Vietcombank, was quoted by the Vietnam Economic Times newspaper on Wednesday as saying.

Vietnam's imports in 2012 rose 7.1 percent from the previous year to $114.35 billion, government statistics show.

Based on Ngoan's comment and government data, Vietnam's foreign reserves would be around $26 billion at the end of 2012. Its value remains a state secret in the country.

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

Thanh estimated the country's foreign reserves at $24 billion, but gave no comparisons.

Last September state media reported the reserves at $22 billion to $23 billion, rising from $19 billion in June 2012 based on a central bank estimate.

Vietnam has projected exports would rise 10 percent this year from 2012 to $126.1 billion, while imports would jump 19 percent to $136 billion, the Industry and Trade Ministry has said.

The central bank kept its official dollar/dong exchange rate unchanged in 2012 at VND20,820 per dollar, while the dong gained 1.06 percent on the interbank market to VND20,815 on Dec. 30, 2012 from VND21,035 per dollar a year ago.

In order to help ease pressure on the dong, the central bank said last week it will directly import gold and trade the precious metal with gold companies and banks.

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