Dollar price drops to VND 15 865

As forecast, the dollar price dropped to VND15,865/US$1 on March 10, the first day the exchange rate trading band of +/-1% was applied instead of the previous level of +/-0.75%.

VND15,865/US$1 was the rate offered by Vietcombank HCM City and Eximbank on March 10. As such, the dollar price has decreased by VND45/US$1 compared to late last week.

The dollar price was lower on the black market the same day, trading at VND15,560-15,590/US$1, down by VND90/US$1 compared to late last week.

Meanwhile, the interbank exchange rate announced by the State Bank of Vietnam on March 10 was VND16,025/US$1. With the 1% trading band, commercial banks can set the trading exchange rates at between VND15,865/US$1 and VND16,185/US$1. However, all commercial banks are applying the ‘floor prices’ as the dollar is now in excess.

The dollar price dropped sharply on March 10 because banks could purchase and sell dollars at low prices. In previous days, they could not do that, though they wanted to.

Commercial banks still buy dollars from businesses, though they have a lot of dollars already. Though the exchange rate quoted by banks is VND15,865/US$1, businesses pocket VND15,600/US$1 only. Commercial banks have been trying to buy dollars at low prices by charging fees for buying dollars, or paying prices lower than the quoted levels.

In fact, banks are not allowed to buy dollars at prices lower than the quoted prices, but they try to dodge regulations by asking clients to convert dollars into other foreign currencies, the Euro, for example, and then sell Euro to banks (no trading band is set up for non-dollar currencies trading).

Businesses have to bargain dollars away because they need VND for their business. Meanwhile, commercial banks are still purchasing dollars in dribs and drabs, because they say the State Bank of Vietnam only purchases a small volume of dollars from commercial banks, which cannot help resolve the dollar excess.

Bankers say that the sharp devaluation of the dollar will prompt people to keep VND instead of dollars. They say that the number of dollar depositors is decreasing.

In related news, the gold price on March 10 was VND18.88mil/tael, down by VND5-6,000/tael from the previous day.

The sharp devaluation of the dollar has made gold cheaper. If importing gold late last week at $972.5/oz, buyers had to pay VND18.71mil/tael (the exchange rate was VND15,910/US$1). Meanwhile, buyers had to pay VND18.6mil/tael only on March 10, as the exchange rate dropped to VND15,865/US$1. As such, every tael of gold has become VND50,000 cheaper thanks to the dollar devaluation.

However, gold traders still have not lowered the sale price of gold, because they imported gold when dollar prices were higher. They say that they will consider lowering the sale prices for the consignments of gold imported later.

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