HCM CITY (Biz Hub)— The dong has continued to gain ground against the US dollar, rising to around VND21,100 late yesterday at most major banks in HCM City.

Techcombank was buying the greenback at VND21,080 and selling it at VND21,190, respectively down by VND40 and VND80 from late last week.

At Vietcombank, the US dollar was weaker by VND26 at VND21,110 and VND21,170.

Eximbank brought dollar at the rates down by VND10 to VND21,100 and VND21,190.

Sacombank kept buying price unchanged but cut selling price by VND56 to VND21,190.

On the grey market the greenback weakened to VND21,370.

Analysts attributed the sudden weakening of the dollar to the central bank's intervention.

Early in July most banks were awash in dong while the inter-bank interest rate was at a low 1 per cent, forcing them to buy foreign currencies, particularly the greenback, and driving up its price.

The State Bank of Viet Nam has issued treasury bills to mop up the money from the market, driving up the inter-bank rate again to 5.5 per cent.This has caused demand for the dollar to fall to normal levels. Besides, the central bank has been pumping dollars into the market.

Many people are now switching from dollar to dong deposits after interest rates on dollar deposits were cut to just 0.5-1.25 per cent at the end of June. The SBV's dong interest rate cap is at 7 per cent.

The dollar supply is also getting a boost from increased foreign remittances, which are expected to top US$10 billion this year. The SBV HCM City branch reported that by the end of the second quarter about $1.9 billion had been remitted to Viet Nam, an increase of 3 percent year-on-year.

The figure is expected to reach $4.5-4.8 billion this year, increasing by 10-15 percent over 2012.

Nguyen Hoang Minh, deputy director of the central bank's city branch, said the plentiful supply of dollars would keep the forex rate stable in the coming months.

The recent volatility in the exchange rates was just a temporary blip amid a long period of stability, and stability would return soon, he assured.Vietcombank Securities Company said there are no concerns over exchange-rate stability, adding any movement in rates would not exceed 1 per cent during the rest of the year. —VNS