The dollar price decrease is attributed to the State Bank’s Circular No 15 dated October 2 which set regulations for foreign currency transactions between credit institutions and customers.
The circular, which took effect on October 3, stipulates that commercial banks can sell foreign currencies to institutions under spot delivery contracts, if buyers need foreign currencies to make payment within two working days. If buyers want foreign currencies for the payment in three or more days, they will have to buy foreign currencies under forward contracts.
With the new regulation, the central bank aims to disperse the foreign currency demand to ease the pressure on the market. If everyone rushes to buy dollars, the high demand would lead to sharp dollar price hike, which would be a threat to the foreign exchange policy.
Thoi Bao Kinh Te Viet Nam commented that the circular has hit dangerous spots of the foreign exchange market, because it has made it impossible for businesses to hoard dollars.
Meanwhile, the regulation could serve as a technical barrier to protect businesses because it allows them to buy foreign currencies at the moment suited to them and at reasonable prices.
The newspaper quoted an official of the State Bank’s Monetary Policy Department as saying that the businesses, which need dollars for payments in the future, should sell dollars for Vietnam dong, deposit dong at banks for profits, and buy dollars under forward contracts, instead of hoarding dollars now and having to pay opportunity costs.
If they do this, the official said, the income from dong deposits would be high enough not only to cover the costs they have to pay to buy dollars under forward contracts, but also to make profit.
Dau Tu reported that many businesses have suffered huge losses because they hoarded dollars before for fear the dollar price would increase further.
Phan Dinh Thuan, director of a chemicals company in Hanoi, said in the newspaper that he bought $100,000 at a high price in late September because he would have to make a payment in December. However, as the dollar price has unexpectedly decreased, he has incurred a loss of VND30 million.
The dollar price began decreasing on October 5 and lost VND200 per dollar every day over the next seven days.
The decision by the State Bank to ease the dollar deposit interest rates by 0-0.25 percent has also helped stop dollar speculation.