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Dollar creeps up after stretch of stability   2009-06-23 - Vietnamnews

With supply well short of demand for the dollar in June, the greenback has been gaining against the dong.

After remaining stable for the previous two months, according to bankers, the dollar has risen by VND11 this month.

On June 18 commercial banks sold the dollar at VND17,799 after the central bank fixed the inter-bank rate at VND16,591.

Meanwhile, on the unofficial market the US currency rose to VND18,310, VND200 up from last week.

Bankers attributed the rise to the burgeoning demand for the currency and the falling dollar inflows into the country due to the global economic crisis.

Many foreign and domestic banks have seen demand for the dollar rise as clients seek to make import payments since the economy is showing signs of recovery, they said.

In the first five months this year foreign direct investment flowing into the country was just US$6.7 billion, a year-on-year fall of 76 per cent. Remittances are also sharply down.

Analysts forecast the dollar to continue strengthening in the next few months when the trade deficit is expected to widen further.

In the first five months the average trade deficit was around $1.12 billion but it has been creeping up – from $1.177 billion in April to $1.5 billion last month.

State Bank of Viet Nam Governor Nguyen Van Giau is, however, not too worried about the dollar’s rise this month.

"The gap between supply and demand is not very serious," he told a press conference on June 17.

"The exchange rate is affected mainly by inflation and trade deficit," he explained. The Government estimates the former to peak at 6.7 per cent and the latter to be around $10 billion.

A general director of a HCM City-based commercial joint stock bank, who wished to remain unnamed, said the pressure on the forex market has eased in the last few days.

His bank also had a considerable quantity of the greenback and could meet normal demand from clients, he added.

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