Dong hits one and half year high on strong dollar inflows

Dong hits one and half year high on strong dollar inflows

The Vietnamese dong rose to a 1-1/2-year high against the dollar Monday as foreign investment and remittances continued to flow into the country, bankers said.

The dollar was traded on the interbank market at VND15,980, its lowest since June 19, 2006. Commercial banks in Hanoi were also buying dollars from retail consumers at about VND15,980 to VND15,985, down 1.7 percent from a peak of VND16,251 on August 17 last year, bankers said. “Demand for the dong at year-end and the very strong dollar sup-ply from foreign investors are the main factors behind the dollar’s fall,” a banker in Hanoi said. She said clients had started with-drawing dollar deposits to change into dong to avoid foreign exchange losses as they expected the dollar to continue losing value against the dong this year. “It makes sense now to save your money in dong because of the higher interest rates and the falling dollar,” another banker in Hanoi said. Twelve-month dong deposits offer nine percent to 10 percent, twice the interest on dollar deposits of about 4-5 percent, he said. Foreign direct investment, including pledges for new projects, reached around US$20 billion last year while remittances from Vietnamese living overseas were expected at a record $10 billion, state media reported this week. In the interbank market, rates on overnight dong loans from state-run Agribank, Vietcombank and Vietindebank stood at 7.0 percent to 8.0 percent, almost unchanged from last week’s range of 7.0 percent to 8.2 percent. Source: Reuters