Vietnam’s Central Bank Says It Intervened to Slow Dong Decline
The State Bank of Vietnam said it intervened “with reasonable volume” in the foreign-exchange market to slow a slide in the dong fueled by increasing dollar demand from importers.
For the rest of 2013, the monetary authority will closely watch currency movements as well as banks’ foreign-exchange levels in order to get into the market in a timely manner and “flexibly manage money supply channels to control cash flow,” it said in a statement on its website today. The central bank said it will try to help the government meet its inflation and economic growth targets.
Vietnam joined central banks in Indonesia and India in intervening in money markets in the past week to support their currencies as speculation the Federal Reserve will rein in monetary stimulus curbed demand for emerging-market assets. The Asia Dollar Index, which tracks Asia’s 10 most-used currencies excluding the yen, fell in five of the last six weeks.
“The pressure on the dong is in line with what we’re seeing in other countries,” Thomas Harr, Singapore-based head of local markets strategy, East, at Standard Chartered Plc, said by phone. “There are global concerns about investors withdrawing money from Asia. It’s a combination of local and global factors.”
He flagged Vietnam’s trade deficit, which widened for a fourth month in May to $1.2 billion from $936 million in April and $546 million in March, as an issue as well.
Sliding Currency
The dong, which has lost about 0.5 percent since April 30, weakened 0.1 percent today to 21,033 per dollar as of 5:00 p.m. in Hanoi, according to prices from banks compiled by Bloomberg. The central bank reiterated it aims to limit the dong’s fluctuation to 3 percent this year. It said it will try to boost credit growth to 12 percent by the end of 2013 from 2.98 percent in the five months through May.
Foreign investors have sold more Vietnam shares than they bought this month, pulling out a net $24.2 million, according to data compiled by Bloomberg. The benchmark VN Index (VNINDEX) of stocks slid to a three-week low, slipping 2.1 percent today in Ho Chi Minh City.
Investors pulled $2.1 billion from Asia in the week to June 12, the most since August 2011, Citigroup Inc. analyst Markus Rosgen wrote in a June 14 report, citing EPFR Global.
Vietnam government bonds fell for the seventh day, with the five-year yield rising 15 basis points, or 0.15 percentage point, to 7.80 percent, according to data compiled by Bloomberg. That’s the biggest jump since July 13, 2012.
Monetary Policy
The government is aiming for economic growth of 5.5 percent in 2013, in what would be its first period of three straight years of growth below 6 percent since 1988, according to International Monetary Fund data. The State Bank of Vietnam has cut interest rates eight times since the start of 2012 as part of efforts to spur expansion.
“We are not looking for a devaluation, but we have to monitor it,” Standard Chartered’s Harr said. “Any concerns they’ve loosened monetary policy too much may weigh on the currency,”
Vietnam faces a “great risk” of macroeconomic instability, Deputy Prime Minister Nguyen Xuan Phuc told lawmakers on May 20, as credit growth trails behind targets while banks work to reduce high levels of bad debt that have hampered expansion.
The economy expanded 5.03 percent last year, the slowest pace since 1999, and the International Monetary Fund in April cut its 2013 growth forecast for the country to 5.2 percent from 5.8 percent.