Vietnam posts surplus in trade balance in July, buoying dong

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Vietnam posted an unexpected trade surplus in July, which may bolster the nation's currency, even as weaker global growth crimps demand for the region's goods.

The surplus in July was $100 million, compared with a revised surplus of $361 million in June, according to preliminary figures released by the General Statistics Office in Hanoi on Thursday. The median of five forecasts in a Bloomberg News survey was for a $150 million shortfall.

A diminishing trade deficit has buoyed confidence in Vietnam's currency this year and helped boost foreign reserves. The nation's imports have grown at a slower pace as the economy expanded 4.38 percent in the first six months, down from 5.63 percent in the same period a year earlier. The monetary authority has cut interest rates for five straight months.

"A smaller trade deficit is positive for the currency," Gareth Leather, a London-based economist at Capital Economics Ltd., said before the report. "While overall, a narrower deficit is good for the economy, the fact that it is related to weak domestic demand has not necessarily been positive."

The Vietnamese dong was trading at 20,883 per dollar as of 3:10 p.m. in Hanoi Thursday. It has gained about 1 percent this year against the dollar, faring better than peers including the Thai baht and the Indonesian rupiah as Europe's deepening sovereign-debt crisis spurred outflows from emerging markets.

Imports were $9.5 billion in July compared with a revised $9.529 billion in June, the Statistics Office said today. For the first seven months of the year, purchases from abroad rose 7.3 percent to $62.991 billion.

Exports fell to $9.6 billion in July from a revised $9.89 billion in June. For the first seven months, shipments climbed 19 percent to $62.933 billion.

The trade shortfall through the first seven months of the year was $58 million, compared with about $5.8 billion at the same time a year earlier, based on the figures released today.

"Exports are doing quite well, and in spite of global demand being weak, we think they will hold up," said Leather. "Companies are looking to relocate at least some of their production outside China."

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