Vietnam Currency Discussion Board

[tenac]

Vietnam Approves Plan for Dong to Trade More Freely
October 3, 2007 07:06 EDT
Oct. 3 (Bloomberg) -- Vietnam\'s Prime Minister Nguyen Tan Dung has approved a plan to allow the dong to trade more freely, the central bank said, without giving details.

Dung will ``gradually\'\' let the dong become convertible, the State Bank of Vietnam said in an Oct. 1 release published on its Web site yesterday. The government decided to let the currency gain in the third quarter by selling foreign currencies, the central bank statement said. It rose 0.9 percent last month, the biggest advance since at least 1993.

``It is good news for the free markets if they\'re talking about it, even if it does take some time,\'\' said Steve Rowles, a currency strategist at CFC Seymour Ltd. in Hong Kong.

Vietnam is among Asian countries that control price swings in their currencies to protect exporters and has targeted a depreciation of 1 percent every year. The benchmark VN Index of stocks has surged 47 percent this year as overseas investors sought to profit from growth in the Southeast Asian economy.

``With the plan, we want to enable the dong to be traded not just in the country but overseas,\'\' said Nguyen Dai Lai, a deputy director in the central bank\'s development strategy department in Hanoi. ``This is a very ambitious plan and will take us a long time to do a lot of work before it can be realized.\'\'

GDP Report

The General Statistics Office may release figures for third-quarter gross domestic product tomorrow. The economy grew 7.9 percent in the first half of the year, from 7.4 percent a year earlier, the government said June 29. Dung predicts it will expand by more than 9 percent next year.

The dong traded little changed at 16,082 against the U.S. currency as of 6 p.m. in Hanoi, according to prices compiled by Bloomberg, after yesterday strengthening as far as 16,080, the highest since June 1.

The central bank has let the currency gain to curb inflation, which at 8.8 percent in September was the fastest since January 2006. A stronger currency makes imported goods less expensive.

``The best way for them to alleviate that inflation situation is to manage the appreciation to take off some pressure,\'\' Rowles said.

Vietnam in January doubled the range in which it allows the dong to trade to 0.5 percent either side of a daily fixed rate against the dollar in response to pressure from overseas investors.

To contact the reporter on this story:
Beth Thomas in Ho Chi Minh City
at [e-mail]