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Thomson Financial News
UPDATE 1-Vietnam Money-Dong falls as investors seek dollars
10.27.08, 4:38 AM ET
HANOI, Oct 27 (Reuters) - The Vietnamese dong may fall to 17,000 per dollar soon due to strong demand for the U.S. currency from importers and equity investors, bankers said.
'The rise in the dollar against the dong is not abnormal and is not synonymous with a deep depreciation in the dong,' Doan Huu Tue, of the central bank's banking development strategy department, was quoted as saying in a government monetary market report.
'After balancing export-import targets, a reasonable exchange rate could be at a level of 17,000 dong to a dollar.'
He did not say when that level might be reached. On Monday, the central bank set the mid-rate for interbank transactions at 16,517 dong per dollar, little changed from a month ago.
'Apart from the usual dollar requirement from importers, a significant part of the rise in demand for the greenback came from foreign equity and bond investors who are under a mandate to restructure their portfolios, not just in Vietnam but globally,' an analyst at a bank in Hanoi said.
Stock traders said on Monday foreign investors had been net sellers in the past 14 sessions to repatriate funds. The country's stock market has fallen more than 60 percent so far this year after a gain of 23 percent in 2007.
The State Bank of Vietnam said in a weekly market report seen on Monday that its base-rate cut of one percentage point to 13 percent early last week also contributed to the weakened dong.
The bank cut its base rate from Oct. 21 as part of efforts to ensure economic growth and limit the impact of the financial crisis.
'The central bank is closely monitoring developments in the market in order to take timely measures to stabilise foreign currency demand and supply if needed,' it said in the report.
Vietcombank, Vietnam's top bank to handle trade payments, said dollar sales more than doubled to $162 million on Oct. 22 from $60 million on Oct. 20, compared with average daily sales of around $50 million in the first nine months of 2008.
State-run BIDV, Vietnam's second-largest bank, said dollar sales also more than doubled to $50 million on Oct. 23 from $20 million the previous day, the report said.
On the interbank market the dollar was trading at 16,840 dong to 16,850 dong at 0300 GMT on Monday, at the top of the trading band of 2 percent against the central bank's mid rate.
The interbank's dollar rate was about 1.5 percent higher than a month ago, Reuters data showed.
(Reporting by Nguyen Nhat Lam; Editing by Jan Dahinten)