Vietnam money dong may be allowed to rise in 2008
HANOI - Expected strong demand for the Vietnamese dong from foreign investors will force the central bank to let the currency appreciate next year, bankers said on Monday.
The authorities have tried to hold the dong down to support exports but, as investment continues to flow in, the currency has pushed up against the dollar.
On the interbank market, the dollar traded at 16,038 dong, down 1.21 percent from a peak of 16,235 dong in September.
"Given the strong appetite for the dong from foreign investors, especially stock investors, the dollar would fall much further next year," a foreign banker in Ho Chi Minh City said.
"It won't be long before the dollar falls under the 16,000 dong threshold," the banker said.
Vietnam's central bank sets a daily official exchange rate for the dong and allows banks to trade within a band of 0.5 percent.
Overall this year the non-convertible dong has eased just 0.1 percent against the dollar.
At an aid donors' conference last week, the International Monetary Fund urged Vietnam to take action to fight inflation -- running at 10.1 percent in November -- and economists said allowing the dong to appreciate would be one way of doing that.
A host of keenly awaited initial public offerings of big state-run corporations including Vietnam Airlines, Agribank, the country's largest, and mobile phone operators Vinaphone and MobiFone would attract billion of dollars from foreign investors, bankers said.
Last week banks asked the government at an investment conference to consider doubling the dollar/dong trading band to 1 percent to allow the currency to trade more freely.
In the money market, overnight rates for dong loans from four state-run banks, Vietnam's key lenders, were at 7.0-7.8 percent on Monday, within the range of 6.5 percent to 8 percent seen last week.
Reuters - December 10, 2007
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