A staff member counts dollar currency at an exchange shop in Hà Nội. The dollar price has remained above the VNĐ25,000 mark since mid-February this year and has shown no signs of cooling down. — Photo vnbusiness.vn
The current sharp appreciation of the US dollar against the Vietnamese đồng on the unofficial market has not affected the stability of the Vietnamese foreign currency market, experts believe.
On the unofficial market, the dollar price on Wednesday hit record high of VNĐ25,480 and VNĐ25,600 per dollar for buying and selling, respectively, an increase of VNĐ110 and VNĐ140 compared to the previous session.
The dollar price has remained above the VNĐ25,000 mark since mid-February this year and has shown no signs of cooling down.
The sharp surge has increased the gap of the dollar price on the unofficial and official markets to some VNĐ1,000 per dollar.
On Wednesday, the State Bank of Vietnam (SBV) listed the central rate for the đồng at VNĐ24,017 per dollar. With the current trading band of +/- 5 per cent regulated by the SBV, commercial banks on the day quoted the rate at around VNĐ24,510 per dollar for buying and VNĐ24,850 for selling.
Lê Xuân Nghĩa, a member of the National Financial and Monetary Policy Advisory Council, attributed the surge to the European central banks having not yet reduced interest rates and possibly keeping the rates at high levels.
The dollar price surge on the unofficial market is also because of an acceleration of the gold price. According to statistics from the World Gold Council, in recent years, Việt Nam has consumed about 50-60 tonnes of raw gold yearly while the country can exploit only 2-3 tonnes of raw gold yearly. Thus, almost all of the raw gold for domestic production and business come from imports worth billions of dollars yearly, but most of it is from unofficial routes, including smuggled imports.
In particular, in recent times, the domestic gold price has often been VNĐ13-20 million per tael higher than the world gold price, which has promoted smuggling and caused the dollar price on the unofficial market to increase sharply.
Additionally, the dollar price hike has been driven by increasing import which saw a growth of 18 per cent in the first two months. When imports increased, the dollar demand also rose, causing the dollar price to surge.
Another reason is the decline in savings interest rates, which now stand at a low of 5.5 per cent for 12-month deposits. This has led people to withdraw their savings and invest in alternative channels, including foreign currencies, contributing to the rise in the dollar's price.
Despite the dollar price surge on the unofficial market, experts said it does not affect the stability of the domestic foreign currency market.
Đinh Đức Quang, independent director of the United Overseas Bank, said despite high fluctuation, transaction volume in the unofficial market is very small compared with the total foreign exchange market. Almost all dollar transactions, which serve the needs of im-export, foreign debt repayment, overseas investment and legal individual transactions such as studying and traveling abroad, are conducted through the official market or the banking channel. Consequently, fluctuations in the unofficial market do not exert pressure on the stability of the country’s foreign currency market.
However, experts noted, the sharp fluctuations of the dollar on the unofficial market can still cause concern for investors and firms.
The State Bank of Vietnam (SBV) has so far this year affirmed the goal of keeping the foreign exchange rate stable. Monetary policies and other measures will be synchronously managed to stabilise the forex market, contributing to inflation control and macroeconomic stability, the SBV stated. — VNS