Speculation of another devaluation is putting pressure on the dong VND, making businesses more reluctant to sell dollars to banks, bankers said on Monday.
The exchange rate slipped to 19,920/19,970 dong by 0706 GMT on Monday at a major gold shop in Hanoi after staying steady over the previous few days. Earlier on Monday, it was 19,850/19,880.
Officially, banks have raised the bid price to between 19,450 and 19,498 dong, a hair below the ask price of 19,500 dong, which represents the dong's trading band limit.
"The narrowed gap between bid and ask prices shows that dollar supply has shrunk and there are signs of instability in the market", said Le Xuan Nghia, deputy director of the National Financial Supervisory Commission.
To circumvent the band, banks were offering dollars at the official rates but requesting additional fees from buyers, bringing the actual rate to as high as those in the unofficial
market.
Traders have also noted that some banks were employing the banned practice of using third currencies again to circumvent the trading band that applies only to dollar/dong transactions,
which pushes the exchange rate to around 19,900 dong, or 2 percent above the top of the the official band.
"Gold prices do not affect much the exchange rate now, but Vietnam's thin reserves and trade deficit do", said a foreign exchange trader at a major lender.
Banks were buying dollars from business at an exchange rate that is higher than the official rate, an indication that lenders are not expecting dollar injections from the central bank, said Lao Dong newspaper quoting a central bank report.
At the same time, exporters, who have received payments in dollars from foreign partners, insist on either selling to banks at high prices or keeping them in deposits, Tuoi Tre said.
Le Xuan Nghia, the government advisor, told Reuters the pressure on the dong was increasing as businesses needed to accumulate dollars to settle greenback loans they had attained
in earlier months of the year.
"People have got used to small but quite regular devaluations", he said.
"But I don't think there should be a devaluation at this point of time, as the pressures are not large enough."
The exchange rate slipped to 19,920/19,970 dong by 0706 GMT on Monday at a major gold shop in Hanoi after staying steady over the previous few days. Earlier on Monday, it was 19,850/19,880.
Officially, banks have raised the bid price to between 19,450 and 19,498 dong, a hair below the ask price of 19,500 dong, which represents the dong's trading band limit.
"The narrowed gap between bid and ask prices shows that dollar supply has shrunk and there are signs of instability in the market", said Le Xuan Nghia, deputy director of the National Financial Supervisory Commission.
To circumvent the band, banks were offering dollars at the official rates but requesting additional fees from buyers, bringing the actual rate to as high as those in the unofficial
market.
Traders have also noted that some banks were employing the banned practice of using third currencies again to circumvent the trading band that applies only to dollar/dong transactions,
which pushes the exchange rate to around 19,900 dong, or 2 percent above the top of the the official band.
"Gold prices do not affect much the exchange rate now, but Vietnam's thin reserves and trade deficit do", said a foreign exchange trader at a major lender.
Banks were buying dollars from business at an exchange rate that is higher than the official rate, an indication that lenders are not expecting dollar injections from the central bank, said Lao Dong newspaper quoting a central bank report.
At the same time, exporters, who have received payments in dollars from foreign partners, insist on either selling to banks at high prices or keeping them in deposits, Tuoi Tre said.
Le Xuan Nghia, the government advisor, told Reuters the pressure on the dong was increasing as businesses needed to accumulate dollars to settle greenback loans they had attained
in earlier months of the year.
"People have got used to small but quite regular devaluations", he said.
"But I don't think there should be a devaluation at this point of time, as the pressures are not large enough."
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