Vietnam’s Dong Strengthens at Banks, Slumps in Black Market

Vietnam’s dong rose the most in two years at the nation’s lenders after the central bank strengthened its reference rate.

The dong gained 0.6 percent to 20,730 per dollar as of 3:45 p.m. in Hanoi, according to prices from banks compiled by Bloomberg. The State Bank of Vietnam set the daily reference rate at 20,698, compared to 20,703 yesterday, according to its website. The currency, which was devalued by about 7 percent last week, can trade 1 percent either side of the daily fixing.

Vietnam’s banks have “plentiful” foreign exchange, central bank Governor Nguyen Van Giau said last week. The monetary regulator “will manage the dong’s exchange rates flexibly in both directions, with strengthening and weakening rates, suiting the money market’s supply and demand,” Giau said on the central bank’s website on Feb. 11.

The dong slumped in the unofficial market, trading as low as 21,840 as of 3:45 p.m. at gold shops in Hanoi, compared with 21,750 yesterday, according to an information service run by state-owned Vietnam Posts & Telecommunications.

“There are concerns in the market that the dong will drop later as demand for U.S. dollar is still high, especially with companies buying the foreign currency to pay import contracts,” said Pham Phuong Lan, Hanoi-based head of the fixed-income and currency trading desk at Bank for Investment & Development of Vietnam.

Government bonds were little changed, keeping the yield on the benchmark five-year note at 11.50 percent, according to a daily fixing price from about 10 banks compiled by Bloomberg.

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