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Dong forwards fall most in two months on devaluation concern (05/11)
06/08/2010 - 8 Lượt xem
One-year non-deliverable forwards fell 3.2 percent to 20,505 per dollar Wednesday, the most since Sept. 1. The nation is caught in a ‘vicious circle” between boosting exports by weakening the dong, Morgan Stanley economists Deyi Tan, Chetan Ahya and Shweta Singh wrote in a report published Wednesday.
“A one-off devaluation could create expectations of further devaluation, leading to more local holdings of US dollars and resulting in the central bank needing to hold more reserves to support the currency,” they wrote.
The dong was at 17,860 against the dollar as of 3:08 p.m. in Hanoi Wednesday, compared with 17,861 Tuesday, according to data compiled by Bloomberg. In the black market, the currency fell to 18,620 from 18,610 on Wednesday morning, according to an information service run by state-owned Vietnam Posts & Telecommunications.
The Southeast Asian nation will probably devalue its currency about 4 percent to 18,500 against the dollar by year-end, according to Australia & New Zealand Banking Group Ltd.
The 12-month contract slid to 24,900 on June 18, 2008, its lowest level since at least 2006, after Morgan Stanley analysts wrote in a report three weeks earlier that Vietnam may suffer a “currency crisis” similar to the slump in the Thai baht that triggered the regional collapse in 1997.
Forwards are agreements in which assets are bought and sold at current prices for delivery at a future specified time and date.
The central bank set the dong reference rate at 17,014 Wednesday compared with 17,012 Tuesday, according to its website. Banks are allowed to trade the dong up to 5 percent on either side of that rate.
The yield on the benchmark five-year note was at 10.33 percent, according to a daily fixing from banks compiled by Bloomberg. A basis point equals 0.01 percentage point.
Source: Bloomberg
