Vietnam Currency Discussion Board

[buckets]

Dollar devaluates in world’s market, revaluates in Vietnam
17:24' 20/04/2007 (GMT+7)

VietNamNet Bridge – While decreasing in value against other hard foreign currencies in the world, the greenback price is escalating everyday in Vietnam’s market.

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The Vietnam Bank for Foreign Trade (Vietcombank), the biggest foreign currency trader in Vietnam, yesterday announced the selling price at VND16,043/US$1, an increase of VND5 over last week’s level. In the black market, the dollar price has reached VND16,055/US$1. Meanwhile, the exchange rate announced by the State Bank of Vietnam was even higher, at VND16,118/US$1.

The greenback seems to keep increasing in value these days, while it declined sharply just one month ago, in late February and early March. At that time, foreign portfolio investment flow increased sharply, while the supply of dollars was profuse as a result of overseas remittances and export company deposits.

However, the situation has rapidly been changed, and the dollar price has been gradually escalating since mid March from the deepest low at VND15,991/US$1 on March 1 to VND16,050/US$1 on April 6 (the exchange rate announced by Vietcombank). The dollar value stayed firm in the next five days, then fell down to VND16,034/US$1 on April 10, but has bounced back since then, despite the dollar devaluation in the international market.

On April 18, the dollar value dropped to the deepest low in the last quarter of the century against the pound, and decreased considerably against Japanese yen and Canadian dollar. Analysts have attributed the dollar devaluation against other foreign currencies to the slow economic growth rate of the US economy and the fact that the US FED has decided to stop raising the key interest rate, while European and Asian economies are trying to tighten their monetary policies. The dollar value slide is believed will continue.

However, in Vietnam, experts have said that it is not likely the dollar will lose its value against the local currency. Boosting exports proves to be the priority task nowadays. This can help ensure a high economic growth rate and reduce the trade gap, especially as Vietnam has joined the WTO.

Meanwhile, on the WTO playing field, a lot of measures aiming to support exports like subsidisation schemes are prohibited. Therefore, developing countries always heavily rely on monetary policies to encourage exports, especially the exchange rate policy.

In theory, when the local currency of a country devaluates compared to foreign currencies, the exports of that country are cheaper and more competitive compared to the products of the same kinds on the market.
In 2006, Vietnam witnessed the export growth rate of 22%, while the dollar revaluated by 1% against the VND. The Ministry of Trade has set the target for the export growth rate of 20% for this year, and this proves to be a very ambitious target.

http://english.vietnamnet.vn/biz/2007/04/687214/