Vietnam's dong dives to 15,000 on black market
HANOI - Vietnam's dong currency
dived in the black market to around 15,000 to the dollar
late this week compared to an interbank rate around
13,900 amid speculation of another downward adjustment
of the official exchange rate.
However, officials on Friday dismissed talk of an
imminent devaluation, which would follow a 9.1 percent
downward adjustment of the official rate on August 7.
``This is just rumour,'' said one official.
A banking source said senior officials had met this week
to discuss the problems associated with Vietnam's
economic downturn, but there appeared to be no push by
the government for another quick move on the dong.
Vietnam has seen sharply lower export growth and
foreign investment approvals in 1998 compared with the
past few years.
On Friday foreign and local bankers said intense
speculation of another adjustment swept normally
lacklustre dealing rooms in the country after the black
market rate balloned in Hanoi and southern Ho Chi Minh
City.
Traditional black market outlets such as gold shops on
Friday quoted the dong at around 14,980/15,000, well
above the interbank market rate of 13,907/13,908. Since
the last devaluation, the black market has become more
active, an indication pressure remained for more
downward adjustments.
The non-convertible dong is allowed to fluctuate seven
percent either side of the official pivot rate on the
interbank market. The pivot rate was fixed at 12,998 on
Friday.
A recorded message at the central bank, the State Bank
of Vietnam, has already been programmed with
Saturday's official rate -- 12,998. The day before the last
devaluation last month, no recorded message was
available.
Hanoi's incremental devaluation on August 7 has
generally failed to stimulate the interbank market, with
people still hoarding dollars in anticipation of further
adjustments.
In a move bankers said was an attempt to stop companies
sitting on dollars, Hanoi last Saturday issued a new
directive that tightened rules governing foreign currency.
The directive has required certain companies to convert at
least 80 percent of their foreign funds held in bank
accounts into the local dong unit.
But it is not yet clear which companies -- foreign, local or
both -- would be subject to the directive.
Hanoi has adopted a policy of small devaluations to try to
boost export competitiveness. Prior to August 7, the
government last allowed a minor downward rate
adjustment in February.
By Dean Yates - Reuters - September 18, 1998.
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