VietNamNet
Bridge – The continued interest rate
reductions are thought to put a hard pressure on the dong/dollar exchange rate.
However, economists do not think that the dong would depreciate sharply this
year.
The
dong/dollar exchange rate to be under pressure
According
to Pham Hong Hai, Deputy General Director of HSBC Vietnam, when the interest
rates go down significantly, this would generate influences on the dong/dollar
exchange rate.
If the
inflation rate decreases sharply as expected by the government after a series
of measures is applied to curb inflation, and if government implements its plan
to slash bank loan interest rates to help businesses resume production, the
total demand of the national economy would increase. If so, the demand for
importing goods would also increase.
When
the dong interest rates go down rapidly, the enterprises, which previously borrowed
dollars, may shift to borrow dong which would be used to buy foreign currencies
to terminate the foreign currency loans. Meanwhile, people would withdraw
Vietnam dong to buy gold. In this case, the demand for gold would increase
sharply.
Besides,
as analysts have pointed out, the demand for dollar would increase towards the
end of the year, when businesses need dollars to import goods for the year-end
sale season.
Banking
experts have said that the dong/dollar exchange rate performance would depend
on the government’s capability of harmonizing the implementation of
macroeconomic tasks, and on the relations among the inflation, bank loan
interest rates and the exchange rate.
Once
the interest rates go down in accordance with the inflation rate performance
and fit the general economic conditions, the pressure on the exchange rate
would not be big.
State
Bank’s commitment would not be broken
Economists
all believe that the task of curbing the dong depreciation at less than three
percent this year would be within reach.
HSBC
thinks that the dong/dollar exchange rate would continue stabilizing, while the
dong may slightly depreciate, reaching the 21,500 dong per dollar threshold by
the end of the year, which means the 2.4 percent depreciation in comparison
with the beginning of the year.
Meanwhile,
Standard Chartered Vietnam has predicted that the exchange rate would be
somewhere at 21,700 dong per dollar.
As
such, the reports by international institutions all show that the exchange rate
fluctuations would be very minor, acceptable to the national economy.
Dr Can
Van Luc, a banking expert, also said that less-than-3-percent exchange rate
fluctuation proves to be attainable.
According
to Luc, the watchdog agency needs to focus on three issues. First, the central
bank needs to control the foreign currency lending in order to drive the
foreign currency credit flow on the right track. Second, Vietnam needs to be
preserving to follow the fight against the dollarization. Third, it needs to
better control the gold market by narrowing the domestic and international gold
prices.
Hai
from HSBC said that if there are signs of the dollar supply shortage which may
trigger heavy price fluctuations, the State Bank would put foreign currencies
into circulation. With the more profuse foreign currency reserves, the State
Bank’s intervention would be absolutely able to control the market prices.
Hai
also said that the Vietnam dong interest rates should be kept at reasonable
rates which allow both fostering the economic growth and making the dong more
attractive, thus helping ease the pressure on the exchange rate.
Analysts
have agreed that the dollar black market, which has been put under strict
control, can no more influence the official markets.
Source:
VTC
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