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Vietnamese currency falls to new low, could go lower

The official exchange rate between Vietnamese dong and U.S. dollar reached its highest this year Wednesday, and experts said the dong could depreciate further.

The State Bank of Vietnam set a central exchange rate of VND22,757 on Wednesday, the sixth time the rate has gone up in the last two weeks.

An employee counts U.S. dollar and Vietnamese dong at a bank in Ho Chi Minh City, Vietnam. Photo by VnExpress/Anh Tu

An employee counts U.S. dollar and Vietnamese dong at a bank in Ho Chi Minh City, Vietnam. Photo by VnExpress/Anh Tu

The dong has fallen by VND352, or 1.57 percent, against the greenback since the beginning of the year.

The dollar’s value increased at commercial banks. At 3p.m. Wednesday, Vietcombank sold the dollar for VND23,350, VND15 higher than Tuesday.

Vietinbank also sold its dollar for VND23,350, VND17 higher than Tuesday, while BIDV sold it at VND23,355, VND25 higher.

The dollar also inched up on the free market. At 11.30 a.m. Wednesday, it was selling for VND23,360-23,410, VND10-20 higher than on Tuesday.

Economist Nguyen Tri Hieu said that the reason for the hike was high demand for dollars toward the end of the year as businesses often import large amounts of materials needed for manufacturing.

The ongoing U.S.-China trade war continues to exert exchange rate pressures, despite the U.S. announcing a 90-day halt on additional tariffs on Chinese goods starting next year, as there is no certainty that tensions will decline, he said.

“There is a high possibility that the dong’s value will continue to fall this year,” Hieu told VnExpress International.

Hieu said that the government should also devaluate the dong against the Chinese yuan so that the trade deficit between Vietnam and China can be reduced.

Vietnam relies heavily on China for materials and equipment for its labor-intensive manufacturing sector.

As the yuan’s value has fallen by 9 percent to the dollar since the beginning of this year, some experts have said that the dong should be devaluated even more to avoid impacts a cheaper yuan. Cheap made-in-China goods could be imported in large quantities to Vietnam and compete with domestic products, they said.

But economist Tran Dinh Thien said that the dong should be kept at a balanced rate between the U.S. dollar and the Chinese yuan. A 2-3 percent band a year is acceptable, he added.

A stronger dollar will benefit exporters, but will also create stronger pressure on inflation and interest rates which will increase business costs in a country with high imports and public debt, Thien said at a recent conference.

He added that the fluctuation of the dong should be controlled to help local companies conduct their business with greater certainty.

The government doesn’t want businesses to suffer shocks, he said.

Prime Minister Nguyen Xuan Phuc had said in August that the devaluation of the dong needs to be kept within a 2-percent band this year compared with the end of last year.


SBV approves BIDV plan to open Yangon branch

The State Bank of Viet Nam (SBV) on March 31 approved the Bank for Investment and Development (BIDV) of Viet Nam’s plan to open a branch in Yangon city, Myanmar.

The BIDV Yangon branch will be located at the Hoang Anh Gia Lai – Myanmar Centre in Yangon city, Myanmar. — Photo

The BIDV Yangon branch will be located at the Hoang Anh Gia Lai – Myanmar Centre in Yangon city, Myanmar. — Photo

The BIDV Yangon branch will have a charter capital of US$85 million.

BIDV received the approval of the Central Bank of Myanmar to open its office in Myanmar in March.

BIDV will be the first Vietnamese bank to open a branch in that country.

Earlier this year, the bank was allowed by the SBV to open a representative office in Moscow, Russia.

The bank reported a pre-tax profit of more than VND7 trillion (US$313.5 million) and total assets worth VND857 trillion in 2015.

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BIDV signs co-operation agreement with VNPT

The Bank for Investment and Development of Viet Nam (BIDV) and the Viet Nam Post and Telecommunications Group (VNPT) signed a co-operation agreement for the 2016-20 period on March 30.

Leaders of BIDV and VNPT sign a co-operation agreement for the 2016-2020 period. — Photo BIDV

Leaders of BIDV and VNPT sign a co-operation agreement for the 2016-2020 period. — Photo BIDV

Under the agreement, BIDV committed to finance VNPT’s and its member companies’ projects with total funds of VNĐ25 trillion (US$1.1 billion). It will also provide VNPT with the modern banking and financial services at competitive prices.

The bank pledged to prioritise the use of technology and telecommunications services provided by VNPT in its operations and for its banking administration and sustainable development initiatives.

For its part, VNPT with its member units and subsidiaries will increase the use of BIDV’s credit products and non-credit products as well as other services, such as insurance, bond distribution consultancy, cash flow management and brand development, at each other’s transaction points to promote and enhance the business performance of both bodies.

BIDV earned more than VND7 trillion in pre-tax profit ($315.2 million) and had total assets worth VND857 trillion in 2015. Meanwhile, VNPT, one of the country’s leading telecom operators, had 33.7 million telephone subscribers at the end of last year, of which, mobile subscribers reached 29.7 million, an increase of 3.3 million subscribers compared to the end of 2014.

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SBV ups anti-dollarisation effort

The State Bank of Viet Nam (SBV) will tighten lending in foreign currencies in some cases from today in an effort to step up its anti-dollarisation drive.

Under Circular 24/2015/TT-NHNN, commercial banks will no longer be allowed to provide lending in foreign currency to exporters who do not need it for offshore payments. Such exporters often used to obtain foreign currency loans from banks and would later transfer them into dong to buy machines and materials for their production activities for the domestic market.

Short-term loans in foreign currency to meet the short-term capital needs for the export of goods via Viet Nam’s border gates will also be prohibited.

However, foreign currency lending will still be available as long-, medium- and short-term loans for offshore payments when importing goods and services, provided that the borrowers have sufficient foreign currency revenue from their production or business activities to repay these loans.

Besides short-term loans to leading petroleum import enterprises that are allocated annual petroleum import quotas by the Ministry of Industry and Trade, allowing them to make offshore payments for imports, commercial banks will also still be allowed to provide loans for overseas investment in key national projects and programmes that the National Assembly, the government or the Prime Minister has approved and for which the Ministry of Planning and Investment has granted overseas investment certificates.

Director of SBV’s Monetary Policy Department Bui Quoc Dung said that previously, the central bank had eased lending in foreign currency to support exporters in the context of an economic slowdown. The exporters had benefited greatly from this previous policy as the lending interest rate in foreign currencies was much lower than that of the dong.

Nguyen Hoang Minh, director of SBV’s HCM City branch, said the tightening of the lending policy would have a negative impact on firms, but it was a necessity for the central bank’s agenda to promote anti-dollarisation in the economy.

Banking expert Nguyen Tri Hieu also said the new policy would affect the competitiveness of exported Vietnamese products. Without the foreign currency loans, whose interest rate is often roughly 6-9 per cent lower than that of the dong, input costs for exported Vietnamese products would rise, he said.

Besides this, Hieu forecast that the tightening of lending policy would also push up the demand for loans in dong, causing a hike in the interest rate for loans.

The central bank’s policies in favour of anti-dollarisation have so far proved to have a positive effect. To date this year, the dong versus the US dollar exchange rate has not seen much fluctuation. The dollar price on the unofficial market was even lower than that listed at banks by VND20-30.

The dollar price has also slid by VND200, from VND22,540 in early January to VND22,340 on March 26. Analysts said this was understandable because dollar holders have gradually withdrawn their deposits from the banks.

The latest data from the SBV showed that as of March 10 this year, the mobilisation of foreign currency by the banking system fell by 3.5 per cent compared with December 31 last year.

The reduction in US dollars deposited in banks showed that speculators are not interested in foreign currency, the analysts said.

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