The greenback was quoted on the streets here yesterday at buy/sell prices of VND20,950/VND20,970 per dollar, rates VND30/VND40 lower than on the previous day. These rates put the black market value of the dong below tSTC posted by commercial banks, a very rare situation.

Vietcombank yesterday posted dollar exchange rates at VND20,920/VND20,990, down from VND20,956/VND21,026 on Monday. Eximbank, meanwhile, listed exchange rates yesterday at VND20,900/VND21,000.

The interbank exchange rate remained unchanged yesterday at VND20,828 per dollar.

Lower foreign exchange rates have helped restrain the rise in domestic gold prices, even as global gold prices have risen. After skyrocketing to VND46 million (US$2,190) per tael ahead of Tet, gold was being traded yesterday at buy/sell prices of VND44.75 million/VND44.93 million per tael, thanks to the shift in exchange rates. (One tael is equivalent to 1.2 ounces)

The world spot gold price on the London Bullion Market yesterday was $1,720 per ounce.

Experts attributed the easing in foreing exchange rates to increased supplies of dollars on the market. A report released by HCM City Securities Co last week noted the large volume of overseas remittances pouring into Vietnam for the recent holiday, helping boost supplies of dollars the domestic market.

Significant levels of lending by commercial banks in US dollars have also pumped the greenback into circulation. The nation's two leading cities of Hanoi and HCM City saw strong credit growth in January, with credit growing 1.96 in Hanoi compared to December, while credit grew in HCM City by a whopping 6.3 per cent, according to the government website chinhphu.gov.vn.

In HCM City alone, outstanding US dollar loans reached a total of VND219.9 trillion ($10.4 billion), a year-on-year increase of 13.3 per cent, accounting for over 27 per cent of the city's total outstanding loans.

Nguyen Ngoc Thang, deputy director of the State Bank of Vietnam branch at HCM City, said that the forex market in the city has been quite stable.

At the beginning of this year, State Bank Governor Nguyen Van Binh said that, without any unexpected external shocks, the central bank would be able to maintain a stable foreign exchange market with currency devaluation this year of less than 3 per cent.

He noted that the surplus in the aggregate balance of payments was forecast to reach about $3 billion this year, helping increase supplies of foreign currency on the domestic market.

Vietnam Investment Review - February 10, 2012