The exchange rate’s 12th adjustment this month caused Vietnam dong to depreciate by around 0.68% within the last four weeks - Photo: Minh Khue

The central bank has raised the exchange rate between Vietnam dong and the U.S. dollar for the 13th time this month, thus devaluing the local currency by 0.73% since early this month.

The central bank on Thursday morning set the inter-bank exchange rate at VND20,788 per dollar, up from the previous VND20,768. Therefore, local banks on Thursday quoted their ceiling rate at VND20,966 and VND20,990 for selling and buying respectively.

The State Bank of Vietnam governor on September 7 promised to curb the rise of the exchange rate at 1% while the inter-bank rate has already moved up by about 0.77%.

Therefore, the rate would continue to be adjusted up to around VND20,840 towards the year’s end.

Securities firms said the volatile exchange rate would discourage investors from participation in the local stock market, push up local gold prices and put pressure on inflation.

If Vietnam dong interest rates decline, the exchange rate will drop as a result, said Le Xuan Nghia, vice chairman of the National Financial Supervisory Commission. “In the next 18 months, stability in the banking system and the exchange rate will be two economic wild cards,” Nghia noted.

As of end-September, the banking system mobilized around US$12.5 billion but lent out up to US$20 billion, with US$5.5 billion of it being short-term loans. The credits that are due have placed pressure on the exchange rate but this pressure is not great as different loans have different maturity dates.

“Local firms should focus on risk management in terms of interest and exchange rates, instead of relying on market factors,” Huynh Buu Quang, head of commercial banking at HSBC Vietnam, told the Daily.

Quang said the central bank should give guidelines on foreign currency lending, and thwart speculation via a flexible foreign exchange control approach.

The market is full of unpredictable factors, he said, adding the exchange rate was still reliant on gold market movements and that gold was now a safe haven of choice for speculators at a time of inflation.

No foreign currency is enough to deal with the gold rush, so industry observers have urged stricter rules put the local bullion market under control.

The Saigon Times Daily