Cambodiabear: Viets prefer to hold USDs rather than the dong as the gov’t has been printing like mad. The gov’t even scaled back the importation of gold to prevent ppl from protecting themselves but gold shops opened at the casino area at the Cambodian border only 70km from Saigon …. thus, ppl were going there to buy metal. Ben the Bernank may learn a few things from Le Duc Thuy before this is all over. Unlike the surplus countries in E and SE Asia, Vietnam has very little in the way of FX reserves; thus, they fear that at some point they won’t be able to import steel/oil, etc.
The market moves came along with the government’s shift from boosting economic expansion to curbing inflationary pressures and calming the foreign exchange market.
Le Duc Thuy, chairman of the National Financial Supervisory Commission, said earlier this month the central bank would “leave interest rates for the market to decide”, instead of urging lenders to bring them down. (cambodiabear: guess that means things got away from them!!)
Falling interest rates had contributed to pressure on the dong as depositors withdrew their savings in a rush for U.S. dollars.
The central bank raised the benchmark base rate to 9 percent from 8 percent on Nov 5, the first move since last December.
But the central bank did not expect the deposit and lending rates to rise so swiftly, economists said.
The central bank has also vowed to speed dong cash injections via the open market operations, saying it had injected 50 trillion dong ($2.5 billion) into the system during the last three days of last week, the Vietnam Investment Review reported.