Greenback price near upper limit

24-Dec-2016 Intellasia | The Saigon Times | 6:00 AM Print This Post

The central bank revised up the dong-US dollar exchange rate to a new high on December 21 while the dollar price quoted by local banks nearly touched the upper limit.

Most lenders in the afternoon quoted dollar prices at VND22,690-22,720 and VND22,790-22,810 for buying and selling respectively, down by VND10 versus those in the morning. Eximbank and DongABank sold a dollar at VND22,800 and VND22,810, VND9 below the ceiling imposed by the central bank.

The central exchange rate was set at VND22,154 on December 21, rising by VND6 against Monday. With the trading band of 3 percent on either side, banks could trade the greenback in a range of VND21,489 and VND22,819.

Meanwhile, currency exchange counters on the informal market sold a dollar at VND23,400 and bought it at VND23,350.

On the world market, the Dollar Index, which measures the dollar value against a basket of rich-country peers like the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, fell 0.2 percent at 103.14 after reaching 103.65 on the previous day, the highest since December 2002.

According to a money dealer at a HCM City-based bank, the demand for foreign currencies always picks up at end of the year. Banks now have short dollar positions but market liquidity is still ample.

Besides, given strong foreign reserves, the central bank is able to sell foreign currencies to stabilise the market, thus preventing the greenback from soaring.

However, some factors will exert pressure on the exchange rate. The policy stance of US President-elect Donald Trump may leave impact on remittances to Vietnam and exports to the US, a major market for many key Vietnamese export products, the banker said.

Commenting on the US Federal Reserve’s decision to raise rates by 25 basis points for the first time in a year, Ngo Dang Khoa, head of trading at HSBC Vietnam, earlier said that higher borrowing costs would prompt investors to withdraw capital from developing markets. Therefore, developing countries whose currencies are pegged to the dollar are under huge pressure to devalue their currencies.

Besides, the nation has had a trade deficit of a combined $700 million over the past two months, piling greater pressure on the exchange rate.

In the current situation, the government should keep dong interest rates at attractive levels. As dollar rates are up and US trade policy remains unclear, enterprises should be more risk-averse.

Meanwhile, the State Bank of Vietnam’s promise to ensure sufficient liquidity in the system will help stabilise the market. It is watching new market developments to timely intervene, so the forex rate might not be strongly volatile in the near term, Khoa predicted.


Category: Finance

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