Vietnam January trade deficit narrows in boost for currency

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Vietnam's trade deficit narrowed in January from December, providing support for a currency that was devalued by about 7 percent a year ago.

The shortfall last month was $100 million, compared with a revised deficit of $269 million in December, according to preliminary data released Thursday by the General Statistics Office in Hanoi.

An improving trade balance may boost confidence in the nation's economy and the dong, which has gained this year after losing more than 7 percent of its value in 2011. Vietnam targets a balance-of-payments surplus of $3 billion in 2012 and enough foreign-exchange reserves to cover 12 to 15 weeks of imports by 2015, central bank Governor Nguyen Van Binh said last month.

"The revived confidence in the dong is probably partly because they've been running smaller trade deficits," Johanna Chua, Hong Kong-based chief economist for Asia at Citigroup Inc., said before today's report. "Resilient remittances, foreign direct investment and official development assistance disbursals are also supporting the balance of payments position."

The dong slumped 7.4 percent last year, the second worst- performer in Asia, according to data compiled by Bloomberg. The VN Index of stocks rallied 2.8 percent Thursday and closed at its highest since Nov. 9. The index has gained in 13 of the past 14 trading sessions.

Higher commodity prices helped bolster Vietnamese exports last year, the World Bank said in December. The monthly trade shortfall was last reported to have exceeded $1 billion in September.

Foreign-exchange reserves may cover about eight or nine weeks' worth of imports, a "small" figure that is then reflected in the exchange rate of the dong, said Louis Taylor, Standard Chartered Plc's chief executive for Vietnam, in comments at a conference last month in Ho Chi Minh City.

Imports in January fell to $6.6 billion from $9.356 billion in December, the preliminary General Statistics Office report showed today. Compared with a year earlier, imports declined 18.7 percent.

Exports slipped to $6.5 billion in January from $9.087 billion in December. Shipments abroad fell 11.1 percent from a year earlier.

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