Vietnam’s central bank says recent VND weakening is “unreasonable”

July 9 (Bloomberg)—The Vietnamese dong’s slide in the last two weeks was “unreasonable” and driven by sentiment rather than supply or demand, the central bank said.

The so-called black-market exchange rate for the currency reached 19,140 per dollar on July 2 from 18,890 on June 23, the State Bank of Vietnam said, without giving a current level. The dong traded at 19,180 in the black market, according to an information service run by Vietnam Posts & Telecommunications, compared with an official rate of 19,085.

The central bank devalued the currency in November and again in February. A disparity between the official and black- market exchange rates which persisted as a reduction in dong interest rates made holding dollars more attractive has narrowed, the World Bank said in a June report that cited a “gradual return” of confidence in the dong.

The State Bank of Vietnam said “the safety of liquidity of foreign currency in the banking system is ensured” as the current-account deficit narrowed in the second quarter from the previous three months and the capital account showed a surplus for the first half of 2010.
Capital-Account Surplus

“The surplus in the capital account was always enough to make up for the current-account deficit,” the central bank said. “Total foreign-currency revenue was larger than total foreign-currency expenditure.”

Vietnam’s foreign-exchange reserves fell to the equivalent of seven weeks of imports from coverage of less than two-and-a- half months in December, the International Monetary Fund said on June 9, without giving a figure. The central bank said it bought a “considerable amount” of foreign currency in the second quarter to help boost the reserves.

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