Vietnam ready to sell forex to stabilise exchange rate: central bank

[HANOI] Vietnam's central bank stands ready to help stabilise the dollar/dong exchange rate and will keep the 2-per cent band movement for the rest of the year, a deputy governor said.

The State Bank of Vietnam (SBV) "is ready to sell foreign currency for intervention to keep the exchange rate stable within the band committed to at the start of the year", Nguyen Thi Hong said in an interview posted on Wednesday on the central bank's website (sbv.gov.vn).

The central bank, which does not regularly report foreign-exchange reserves, said last year the total in June 2014 was US$35 billion, compared with US$9 billion in 2011.

The SBV, which has committed to keeping the Vietnamese dong move within a 2 per cent band against the dollar in 2015, on May 7 devalued the dong for the second time this year.

The devaluations were intended to spur exports and curb imports. On Tuesday, the government announced a US$3 billion deficit for the first five months. In the same period of 2014, there was a US$1.52 billion surplus. "Standing by the view of the overall national interest, the SBV will continue its direction for the whole of 2015 to regulate (the exchange rate) within a 2-per cent band," Hong said.

On Tuesday, the dong fell to 21,860 per dollar on Vietnam's interbank market, or 0.98 per cent weaker than its 21,645 level right after the May 7 devaluation.

On Wednesday, the dong strengthened to 21,765/21,825 per dollar on the interbank market. The central bank has kept the official mid-point rate unchanged at 21,673 dong per dollar since May 7.

Dollar/dong transactions are allowed to move in a band of 1 per cent around the mid-point set daily.

A substantial dong devaluation could benefit exporters but it will also bring negative impact to importers and raise the sovereign debt, Hong said.

Keeping a strong domestic currency will also encourage banks to sell dollar to banks, which has been a practice since the start of this year, she added.

In a report on May 8, right after the second devaluation, ANZ said the dong could fall 3 per cent to 22,050 dong per dollar at the end of 2015, faster than a 1.4-per cent depreciation last year.

The government has projected that there could be a US$6 billion trade deficit this year. For the past three years, there have been trade surpluses.

REUTERS