Vietnam Currency Discussion Board

[tenac]

Vietnam\'s Dong Extends Gains to Fifth Day, Longest in Two Years

Sept. 25 (Bloomberg) -- The Vietnamese dong extended its gains to a fifth day, the longest winning streak in more than two years, on speculation the central bank is allowing the currency to strengthen to slow inflation.

The government has a policy of devaluing the dong by about 1 percent a year to boost exports and economic growth. A weaker currency has quickened inflation, which reached the fastest in 17 months in August. The General Statistics Office will release consumer-price index figures for September as early as today.

The currency rose 0.1 percent to 16,110 against the dollar as of 9:21 a.m. in Hanoi, according to prices from HSBC Holdings Plc, the longest run of gains since July 26, 2005. The dong has jumped 0.8 percent since Sept. 18 after the State Bank of Vietnam devalued it 0.6 percent in the previous six months.

``The central bank is probably a little concerned about inflation and is allowing some gains\'\' in the dong, said Katie Dean, a senior economist at Australia & New Zealand Banking Group Ltd. in Melbourne. ``This may be preemptive work before the inflation numbers which may be a bit nasty.\'\'

Vietnam hasn\'t changed its policy of seeking a weaker currency, Nguyen Dong Tien, a deputy governor of the State Bank of Vietnam, said yesterday. ``In setting the daily exchange rate of the dong against the U.S. dollar, we have to look at the market\'s movement and can be flexible.\'\'

Exports Increase

The government has let the dong weaken for 11 years. Exports increased 19 percent from January to August, the General Statistics Office said last month. Deputy Prime Minister Nguyen Sinh Hung said in July the government wants overseas shipments to grow as much as 23 percent this year.

``The currency may hold on to recent gains as the inflation numbers are coming,\'\' Dean said. ``Longer-term though, we see the central bank continuing its policy of slowly depreciating\'\' the dong.

Yields on benchmark five-year bonds climbed yesterday on concern inflation will accelerate. Five-year note yields rose 6 basis points to 8.17 percent, according to prices set by banks once a day and compiled by Bloomberg. A basis point is 0.01 percentage point.

To contact the reporter on this story: Beth Thomas in Tokyo at [e-mail] .