Heat of the greenback rates cools down after the State Bank of Viet Nam (SBV) listed its forex rate on May 15.—Photo cafef.vn

As of May 7, the SBV increased the inter-bank exchange rate from VND21,458 to VND 21,673 per US dollar. With an effective exchange rate on a one per cent margin, the ceiling rate was VND21,890 per dollar.

After the second increase, rates had settled between VND21,720 and VND21,750 for five days. However, on May 13 and 14, each dollar added about VND100 in the market.

At the end of May 14, the rates of most banks added another VND30-40 each dollar, listing at VND21,820 (buying) and VND21,830 (selling). Techcombank even sold a dollar at VND21,840, or VND50 lower than the ceiling price set by the SBV, as the highest rate of the day among local banks.

Rates also rose at similar price in the flea market. Quoc Trinh Gold and Jewelry Company on Ha Trung Street, one of the most popular spots for money exchange in Ha Noi, bought each dollar at VND21,800 and sold them at VND21,850.

In the morning of May 15, the central bank listed its buying and selling reference rates at VND21,600 and VND21,820, respectively. In the afternoon, the rates fell in local banks as well as the flea market.

Following this, Techcombank reduced VND110 on the buying side and VND30 on the selling side, listing its rates at VND 21,650 (buying) and VND21,810 (selling), respectively.

Reducing VND15, the buying and selling rates of Vietcombank and BIDV were VND21,745 and VND21,805, respectively. Reducing VND10, the buying and selling rates of ACB and Eximbank were VND21,720 and VND21,800, respectively. DongABank's buying rate was VND 21,735 and selling rate was VND21,810. Rates for each US dollar in the flea market also stayed at VND21,760 and VND21,790 (buy-sell)

A manager from a local commercial bank told financial site cafef.vn that after the SBV's second lift, greenback trading transaction rose fast, especially in buying. The manager expects that the US dollar will rise against dong in the short term.

Nguyen Hoang Minh, deputy director of the SBV's HCM City Branch, also took good liquidity as a reason for the rise this time. However, he said commercial banks still met all demands for the foreign currency of the enterprise.

The SBV, as the last trader in the market, listed its selling price of VND21,820 or VND 70 lower than the ceiling price, implicating that it will be ready to interfere in case of any tension.

One day earlier, on May 14, Truong Hung Long, director of the Finance Ministry's Debt Management and External Finance Department, said the SBV anchoring the US dollar will not harm the public debt. He explained that 46 per cent of the government debt was in foreign currency, including half in the greenback. Although lifting USD/VND added to the greenback prices in the market, it was lower compared with other foreign currencies. Long noted that if the public debt was calculated in both USD and other currencies in VND, they were mostly the same.

Totally different from Long's idea, the Ministry of Planning and Investment calculated in April that a one per cent lift would add VND10 trillion ($458.7 million) to the public debt.

Thus, in the first five months, the central bank lifted the USD/VND rate by two per cent, the maximum rate it has committed for 2015 so far.

Like other banking experts in Viet Nam, researchers from Viet Nam Institute for Economic and Policy Research (VEPR) believe that the country can allow three to four per cent inflation each year within 2 or 3 years, with a step by step increase of 1-1.5 per cent.

According to reuters.com, the dollar struggled near three-month lows against the euro on May 15, with mixed US data doing little to ease investor concerns that the pace of the recovery of the world's largest economy may be too slow to allow interest rate hikes soon. — VNS