HCM CITY (Biz Hub)— The exchange rate between the Vietnamese dong and US dollar is likely to continue rising in the remaining months of the year, but it would still be under the control of the State Bank of Viet Nam, according to a source from the Ministry of Industry and Trade.

The ministry's Commercial Information Centre predicts that the rate may increase from VND21,500 to 21,700 per dollar by the year-end due to increasing demand for the greenback, but there would be no major change in supply.

The recent forex rate increases have been caused by various factors that have resulted in an imbalance between supply and demand for the dollar, the agency says.

However, there are other factors that will stabilise the forex rate in the remaining months of the year, one of which is that the lending and deposit interest rates of both dong and US dollars would continue to fall.

Another factor is that the central bank has affirmed that it would not devaluate the dong.

As the value of the dong is maintained and interest rates on dollar loans and deposits go down, the greenback will become less attractive and people will stop hoarding it.

In addition, although the market's demand for the greenback is predicted to rise during the rest of the year, there will be adequate supply because disbursement of the direct foreign investments will be stable.

In the last five months, about US$4.6 billion was disbursed, up 1.6 per cent over the same period last year.

The country's foreign exchange reserves will be maintained in a stable manner, creating a firm financial basis for the central bank to intervene and stabilise the financial market if there are strong fluctuations, the centre says.

It concludes that the market will not experience a foreign exchange "fever" that has previously had a shock effect on the economy. — VNS