Vietnamese Dong Drops as Central Bank Raises Ratio; Bonds Gain
By David Yong
June 1 (Bloomberg) -- The Vietnamese dong fell for a fourth day after the central bank today doubled the amount of deposits commercial banks must set aside as reserves to help cool inflation. Government bonds rose.
The currency completed its third week of declines as it fell to near the lowest in six months. State Bank of Vietnam Governor Le Duc Thuy said on May 24 that the central bank had been selling the dong to help exporters.
``The dong is weakening by policy,'' said Daniel Hui, a currency strategist at HSBC Holdings Plc in Hong Kong. The central bank has had to soak up onshore liquidity and ``buy up excess dollars to maintain its depreciation policy,'' he said.
Vietnam's currency was at 16,088 to the dollar as of 3:12 p.m. in Hanoi, according to prices compiled by Bloomberg. It has declined about 0.2 percent this year. The central bank allows the dong to trade 0.5 percent on either side of a daily rate.
Hui said he expects the central bank to scrap its weak- currency policy over the medium term because it would prefer to use the dong to control inflation rather than relying on measures such as capital controls.
Vietnam's government bonds gained, pushing benchmark five- year yields to the lowest in six weeks. Local banks must raise their reserve-requirement ratio to 10 percent from 5 percent today, the first increase since July 2004.
The yield on the five-year security fell 4 basis points, or 0.04 percentage point, to 7.12 percent, according to fixing rates from seven banks set once a day and compiled by Bloomberg. Bond yields move inversely to prices.
By David Yong
June 1 (Bloomberg) -- The Vietnamese dong fell for a fourth day after the central bank today doubled the amount of deposits commercial banks must set aside as reserves to help cool inflation. Government bonds rose.
The currency completed its third week of declines as it fell to near the lowest in six months. State Bank of Vietnam Governor Le Duc Thuy said on May 24 that the central bank had been selling the dong to help exporters.
``The dong is weakening by policy,'' said Daniel Hui, a currency strategist at HSBC Holdings Plc in Hong Kong. The central bank has had to soak up onshore liquidity and ``buy up excess dollars to maintain its depreciation policy,'' he said.
Vietnam's currency was at 16,088 to the dollar as of 3:12 p.m. in Hanoi, according to prices compiled by Bloomberg. It has declined about 0.2 percent this year. The central bank allows the dong to trade 0.5 percent on either side of a daily rate.
Hui said he expects the central bank to scrap its weak- currency policy over the medium term because it would prefer to use the dong to control inflation rather than relying on measures such as capital controls.
Vietnam's government bonds gained, pushing benchmark five- year yields to the lowest in six weeks. Local banks must raise their reserve-requirement ratio to 10 percent from 5 percent today, the first increase since July 2004.
The yield on the five-year security fell 4 basis points, or 0.04 percentage point, to 7.12 percent, according to fixing rates from seven banks set once a day and compiled by Bloomberg. Bond yields move inversely to prices.
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