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NEWS UPDATES 3 December 2009

Vietnam: Central bank ready to stabilise dong

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Vietnam's central bank is prepared to intervene on a "very big scale" to stabilise the beleaguered dong, backed by foreign exchange reserves of more than $16 billion, a deputy governor was quoted by Reuters as saying Thursday.

The comments by Nguyen Van Binh come a week after Vietnam devalued the dong for the third time since the start of 2008 to relieve pressure on the currency in the face of dollar hoarding.

"We are ready to carry out very big scale (intervention) in order to keep the exchange rate stable in the market," the deputy governor of the State Bank of Vietnam said.

"It will depend on the real condition in the market. We can sell as much as we need in order to make the market stable," Binh told reporters.

"According to our figures, frankly speaking, our reserves are more than three months of imports. That is consistent with international standards," he said. "I think they are more than $16 billion."

Previous attempts to control a long-term slide in the dong included two devaluations last year and widening the currency's trading band several times.

"This time our solution is to strongly intervene," central bank governor Nguyen Van Giau said last week when he announced the mid point of the dong's daily trading band would be shifted down by more 5 percent overnight.

Dollar hoarding is widespread in Vietnam among ordinary people and companies alike. Many big-ticket business transactions are conducted in dollars, but foreign exchange supply has been squeezed by the global downturn, which hit big foreign exchange earners such as exports, remittances and foreign investment.

Two devaluations of the dong in 2008 had also fed expectations for yet further devaluations.


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