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Foreign currency market: supply increasing, demand decreasing   2008-10-14 - Lao dong

Some experts believe that the dollar price will decrease as more dollars will inflow into Vietnam before the end of the year. Meanwhile, others say that dollar supply and demand prove to be unpredictable.


The VND/US$ exchange rate has been decreasing slightly for the last few days. Eximbank’s quoted exchange rate saw the VND5/US$1 price decrease every day from October 7-10, which meant the dollar price fell from VND16,600/US$1 on October 7 to VND16,620/US$1 on October 10.


Bankers say that the supply of dollars has been profuse, while the demand for dollars is tending to decrease. The trade deficit has decreased sharply. The trade deficit in the first nine months of the year was high at $15.83bil, but the figure was just $500mil in September. Meanwhile, dollars continue inflowing into Vietnam in the form of foreign direct investment with $8.1bil arriving in the first nine months of the year. It is expected that overseas remittance will also increase considerably over last year.


The two above said factors, together with the devaluation of the dollar in the world’s market, have been putting pressure on the VND/US$ exchange rate, forcing the dollar price to decrease.


Ho Huu Hanh, Director of the HCM City Branch of the State Bank of Vietnam, said that the dollar supply has been increasing also because more and more Viet Kieu all over the world, especially in the US, are bringing dollars to Vietnam to do business.


Participants at a recent workshop on the stock market’s development held by the HCM City Stock Exchange heard that Vietnam may become an alternative investment destination in the context of the global economic recession. This would lead portfolio investment increasing in the time to come.


If the forecast becomes true, the volume of dollars inflowing into Vietnam will be very big by the end of the year.


Nevertheless, others believe that a lot of things may happen unexpectedly by the end of the year. Dao Hong Chau, Deputy General Director of Eximbank, said that the foreign currency market is being controlled by many factors. Many big banking groups in the world are losing liquidity and it is likely that they are trying to withdraw the investments from their branches in countries in the world, including Vietnam, to settle their difficulties.


Regarding overseas remittance, the general director of a bank, who asked to remain anonymous, said that one should not expect abundant overseas remittance this year as Viet Kieu also are facing the same difficulties from the economic crisis as everyone else in the world.


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