The domestic gold price has continued to drop after the State Bank of Vietnam allowed importation of the precious metal early last week, while the dong exchange rate against the US dollar on the free market has showed signs of increasing again though the bank announced it will begin selling dollars to banks.
A teller counts US dollar banknotes at a bank in Ho Chi Minh City (Photo: SGGP)
The Central Bank said it will keep the exchange rate stable and sell dollars to several commercial banks to help meet demand for import of essential goods till the end of this year.
The measure was aimed to help enterprises prepare their business plans that work, and stick to them without worries about changes in the exchange rate.
However, the rate has been still prone to soar sharply despite the bank’s announcement that the supply of foreign currency will be adequate for the market demand.
The US dollar was still high at over VND21,000 on the free market last weekend.
Some experts forecast that the import of gold, which was aimed to cool the domestic gold market, will raise the demand for dollars.
The director of a joint stock bank said the bank has encouraged enterprises to negotiate with their partners to make payment in other foreign currencies rather than US dollars, to avoid a risk of US dollar shortage in the end of the year.
If the Central Bank sells dollars, only enterprises who import essential goods or materials to produce essential goods are eligible to buy, he added.
National Monetary Policy Consulting Council member Tran Hoang Ngan said Vietnam has been relying heavily on imported materials, therefore, any changes in exchange rates will affect prices of domestic goods made from imported materials.
To stabilize the dong/US dollar exchange rate, the Government should take measures to reduce dollarization and trade deficit, he said.
In addition, the policy on regulating the rate and the inter-bank exchange rate need to be more flexible. The inter-bank rate has to be appropriate to the market rate, so it should be adjusted following changes in the market rate, he added.
Gold prices falling
The price of gold dropped to below VND35 million (US$1,666) per tael last weekend.
In Ho Chi Minh City, the buying and selling prices of SJC gold were VND34.9 million and 35.1 million per tael respectively.
Tran Thanh Hai from the Orient Commercial Joint Stock Bank said the domestic gold price has decreased thanks to a drop in the global gold price, the Central Bank’s decision to allow gold to be imported, and the Finance Ministry’s decision to slash gold import tax to zero from one percent.
Experts said the current slide in domestic gold price is not a surprise as the price soared sharply, by nearly 20 percent within the last three months.
Some experts said the price will continue to fall this week, while others said it will rise by the end of the year.
Dr. Le Xuan Nghia, vice chairman of the National Financial Supervisory Committee, said the global gold price might go up as the precious metal is still considered a safe-haven asset, generating fat profits.
Central banks in the world have also increased their gold reserves and continued to buy gold, while demand for gold in India has surged again, he added.
He said, demand for gold has risen in the local market too since many credit contracts relating to gold have been liquidated and people have paid their debts in gold.
The global and local high demands for gold will push up gold prices in future, he added.
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