May 2, 2012

Vietnam - Banks enter sprint-race to prepare for new foreign currency position policy


VietNamNet Bridge – The gold market stays gloomy, while the import-export activities have been quiet, but the dollar prices have been increasing rapidly in recent days.

While the interbank dong/dollar exchange rate had been kept stable for the 99th day until April 28, commercial banks have raised the dollar prices continuously since April 26, before the new regulation on banks’ daily foreign currency position takes effect in early May.

Banks try to buy more, block sale

On April 27, Vietcombank quoted the buy and sale prices at 20,850-20,930 dong per dollar, respectively. The prices quoted by BIDV were 20,840 – 20,910 dong per dollar, Eximbank 20,850 – 20,920, ACB 20,840 – 20,900 dong per dollar. The quoted prices represented the 10-20 dong per dollar increase in comparison with the previous day.

Especially, the dollar prices increased continuously last week with the price increasing by up to 30 dong per dollar some days. To date, the dollar price has increased by 70-80 dong per dollar since the beginning of the month. Meanwhile, the official dong/dollar exchange rate announced by the State Bank has been stable at 20,828 dong per dollar over the last three months.

The recent unexpected dollar price increases have been explained by the fact that banks are gearing up to cope with the new policy to take effect as of early May.

Commercial banks have been trying to collect foreign currencies. L, a dollar depositor at ACB, said that the dollar deposit at the bank is due in some more days. L was wavering between selling the dollars or not, because the dollar was too low. However, a bank officer has advised her to sell dollars to the bank, as the dollar price has increased by a little.

It could be a surprise to many people that banks still try to collect more dollars, while they have to bear tighter regulations on providing foreign currency loans as of May 2.

An expert said that the 50-70 dong per dollar increase in the last month does not mean that the demand is higher than the supply. However, the continued dollar price increases in the last week of April clearly showed that banks now need big amounts of foreign currency.

The expert, analyzing the markets which have influences on the dollar market, such as gold, import-export activities and credit growth, affirmed that the markets all have been stable, while the liquidity has become weaker, therefore, the markets could not be the reasons behind the recent dollar price increases.

The only reason is that banks have been gearing up to balance the foreign currency positions before the Circular No. 07 takes effect on May 2, under which the foreign currency position of commercial banks at the end of the day must not be higher than 20 percent of the owners’ equity.

“Some commercial banks made a mistake before when lending too much in dollars. Therefore, they now need big amounts of dollars to be able to satisfy the new regulation on the foreign currency position,” the expert said.

Meanwhile, Nguyen Hoang Minh, Deputy Director of the HCM City Branch of the State Bank of Vietnam does not think this way.

“I think that the dollar price has increased because banks now try to push up the lending in dollars before the day the State Bank tightens the conditions for borrowing in foreign currencies,” he said.

The dong/dollar exchange rate has been stabilized for a long period. Dragon Capital, for the first time in its 17-year operation in Vietnam, announced a couple of weeks ago that the net assets of the funds managed by the company had increased by 1.4 percent, since the dong has appreciated against the US dollars.

Just one year ago, they complained that Vietnam adjusted the exchange rate too many times, and they did not know what to say to investors about the dong value stabilization when raising funds, according to Thoi bao Kinh te Saigon.

Source: Dat Viet, TBKTSG



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