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VND/US$ exchange rate down, capital flowing into stocks   2008-08-25 - Lao dong

As the dollar and gold prices have been decreasing, and stock prices increasing, people are now tending to convert dollars into VND to make bank deposits to enjoy higher interest rates, or inject money in stocks.


People are now tending to convert dollars into VND to make bank deposits to enjoy higher interest rates, or inject money in stocks.

Foreign currency transactions on the black market have become quiet these days with VND/US$ exchange rates decreasing. The dollar prices on the market are now even lower than the rates quoted by commercial banks


Investors’ capital is now going back to the stock market, as the VN Index is marching towards the 550-point threshold. Securities investors now can gain the satisfactory profit of 50% on average, and even higher profit on some share items.


Meanwhile, those who have spent money to buy dollars to store up in May-June are suffering losses. They are losing VND2,500 on every dollar they bought when the dollar was VND19,000/US$1. If they bought $10,000 in June, and sold dollars now, they would lose VND20mil as the dollar price has dropped to VND16,600/US$1.


US$ deposits earn just half the interest of VND deposits. Especially, the interest rate for US$ deposits has been cut from 8% per annum (12-month term deposit) to 6%. Bankers say that they considered foreign currency demand to calculate US$ deposit interest rate cuts.


Vietcombank and Eximbank on August 23 quoted dollar prices at VND16,550-16,610/US$1 (purchase and sale), down by VND40/US$1 over the previous day. The interbank official rate announced by the State Bank for the same day was VND16,498/US$1.


Standard Chartered Bank has reported that Vietnam’s trade deficit considerably improved in June and July, with the deficit at less than $1bil a month (the average trade deficit was $2.7bil in the months from January to May).


Meanwhile, import growth has brought big profit to Vietnam’s economy. Export turnover was $6.2bil in June and July, up by 53.7% and 46.1%, respectively, compared to the same periods of last year. Vietnam’s exports are expected to increase sharply despite the uncertainties of the global economy.


Analysts say that steel imports had a big influence on the trade balance. Vietnam imported $1bil worth of finished steel in March 2008. Meanwhile, the imports dropped to $430mil in June and July. The product alone has helped the trade deficit decrease by $600mil a month. It is clear that the trade deficit is decreasing and the foreign currency supplies have become profuse, which spells that the VND/US$ exchange rate will not see big fluctuations in the last months of 2008.


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