Central bank to ‘manage’ currency to narrow trade deficit

The State Bank of Vietnam will pursue a monetary policy that may help narrow the country’s trade deficit amid concerns the economy may slow further.

“The State Bank is closely watching the market’s development to flexibly manage the dong’s exchange rate to help keep the trade deficit under control,” a statement on the central bank’s website said.

The government has cut its growth target to 6.7 percent for this year and 6.5 percent next year, compared with 8.5 percent in 2007. The trade gap in the first 11 months widened 56 percent to US$16.9 billion, with export growth slowing as stagnant global economies cut demand for the nation’s products.

“Other countries have been affected by the global financial turmoil more on the financial side,” Martin Rama, acting country director for the World Bank in Vietnam, said in Hanoi Friday.

“For Vietnam, the main question will have to do with exports and foreign investment.”

The State Bank set its reference rate for Friday’s dong trading at VND16,483 per dollar, compared with VND16,479 on November 24.

Banks are allowed to trade the currency by up to 3 percent on either side of the official rate. The dong traded at VND17,180 to VND17,230 in the free market in Hanoi, the central bank said in the statement, which reviewed this week’s money market.

Source: Bloomberg