~ Le ViÍt Nam, aujourd'hui. ~
The Vietnam News

[Year 1997]
[Year 1998]
[Year 1999]
[Year 2000]
[Year 2001]

Vietnam's dong stable on economic slowdown

HANOI - Vietnam's dong currency remained stable over the last month as a slowdown in the communist-run country's economy had left plentiful supplies of U.S. dollars and the local unit, bankers said.
They said economists still considered the dong overvalued, but any immediate market pressure for devaluation had evaporated due to a lack of demand for both dollars and dong.

``At the moment the market is generally dead and I don't think there is any pressure on the exchange rate,'' said the treasurer at one foreign bank.
``Foreign currency supply is meeting demand and that is a reflection of a lack of demand based on the state of the economy -- imports have dropped and there really is not any demand (for dollars),'' he added.

The official dong/U.S. dollar rate is set daily and allowed to trade in a 0.1 percent band, but the local unit has slid a mere 81 dong against the dollar to 13,961 dong in the past six months, when a new method of setting the currency was introduced. Wong Yit Fan, chief economist in Southeast Asia for Standard Chartered Bank, said he expected a further marginal dong depreciation of three to four percent over the next 12 months.

``Because partly the dong is pegged to a weakening U.S. dollar and since other regional currencies are likely to appreciate (against) the weakening U.S. dollar, you are getting a de facto depreciation anyway,'' he told Reuters. He said the expected enactment of a comprehensive trade pact between Hanoi and Washington this year would also support the dong through increased Vietnamese exports to the U.S. market.

But the bank treasurer urged caution and said the dong could weaken. ``I think going forward we may see a touch of weakness in some of the regional currencies which may reassert some competitive export pressures on the dong again,'' he said. Vietnam has devalued the dong by some 20 percent in three separate adjustments during the past two years.

Officials have ruled out a hefty devaluation because of the possible social impact, especially if the move sparked a sharp rise in inflation, which has remained well in single figures over recent years. Vietnam's dollar supplies have been helped by both a slowdown in import volumes and recent export growth.
Hanoi estimates that imports for the first eight months this year were 5.7 lower than for the same period in 1998, while exports grew 15 percent.

Reuters - August 31, 1999.