Vietnam urges "strong measures' to stabilize forex, gold

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Vietnam's prime minister has urged "strong measures" to stabilize foreign exchange rates and gold prices after the dong slumped to a record low in the free market on Wednesday.

The central bank "must take strong measures to stabilize prices of gold and foreign currencies, and interest rates," Prime Minister Nguyen Tan Dung said in a directive issued Tuesday.

One US dollar traded at VND21,500, more than 13 percent above the official rate of VND18,932 set by the State Bank of Vietnam.

With the dong under pressure and inflation refusing to drop below government targets, the State Bank last month raised key interest rates for the first time in a year.

The bank's key rate rose to nine percent from eight percent in a move that increased the cost of borrowing for commercial banks.

While the dong weakens, most other regional currencies have strengthened.

"Severe punishments will be given to those who speculate or corner gold and foreign currencies on the market," he warned.

In Vietnam many people see dollars and gold as a safe haven against economic uncertainty.

Official figures show that year-on-year inflation reached 11.09 percent in October, above the government's targeted maximum of eight percent this year.

Vietnam in August devalued the dong for the third time since late 2009.

While the dong weakens, most other regional currencies have strengthened.

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