Vietnam’s dong declined the most in more than two weeks on speculation companies are buying dollars ahead of a new rule restricting foreign-currency loans. Government bonds fell.
Commercial banks are being asked to restrict dollar lending to some companies that need greenbacks to pay for imported products such as fuel, and will now need central bank approval, according to a statement on the State Bank of Vietnam’s website March 9. The new rule takes effect from May 2.
“Demand for the dollar is increasing because from May 2, the central bank will restrict lending in foreign currencies,” said Cao Tan Phat, a Ho Chi Minh City-based analyst at ACB Securities Co. “As the deadline is coming, companies are rushing to buy dollars.”
The dong fell 1 percent to 21,034 per dollar as of 5:21 p.m. in Hanoi, the biggest drop since March 2, according to data compiled by Bloomberg. The central bank set the reference rate at 20,828, unchanged since Dec 26, its website showed. The currency is allowed to trade up to 1 percent on either side of the official rate.
The State Bank of Vietnam is also lowering lenders’ long or short foreign-currency position limits to the equivalent of 20 percent of their capital, according to a statement on its website today. The new regulation, also effective May 2, replaces a previous limit of 30 percent.
Yields on the five-year bonds rose three basis points, or 0.03 percentage point, to 11.53 percent, according to a daily fixing from banks compiled by Bloomberg.