Citing figures from Bloomberg, the CEO of HSBC Việt Nam Sumit Dutta said that Việt Nam đồng was the third among Asian currencies in terms of stability against the U.S. dollar since early this year to August.
He said in a business luncheon with members of foreign associations in Việt Namm on Việt Nam’s economy on Wednesday in Hồ Chí Minh City (HCMC) that many regional currencies took a hard hit after the Federal Reserve (Fed) in late July revealed that they could gradually reduce the pace of the bond-buying package QE3.
Emerging markets in Asia and elsewhere saw the wave of foreign outflows, prompting strong depreciation of those countries’ currencies against the greenback.
By August according to information given by HSBC, the Indian rupee had weakened by 15.47% against the dollar, while the Indonesian rupiah depreciated by 12.68%.
Meanwhile, Việt Nam đồng had depreciated by 1.5% against the dollar by August, the third most stable currency behind China’s yuan and Hong Kong dollar.
Trịnh Nguyên, an economist of HSBC, said that there were two reasons making Việt Nam đồng stable against the U.S. dollar over the past year.
Firstly, the country’s trade deficit has been narrowed down significantly and Việt Nam does not need to depend on foreign capital flows to offset the deficit.
She told the Saigon Times Daily that it was mainly because the Government had maintained such policies as increasing interest rates and controlling credits since 2011 which dampened the domestic demand and also the import demand.
Secondly, foreign capital flowing into Việt Nam has been mainly foreign direct investment which is more stable so Việt Nam đồng has not been affected by the volatile portfolio flows.
Although Việt Nam has not been as attractive as other regional countries in luring portfolio investment, but in the positive view, Nguyên said that situation hedged the country against vulnerable portfolio investment.
“In short term, Việt Nam is not attractive to foreign investors, but in long term it is attractive as the foreign direct investment has strongly increased this year.”
She also said that in her opinion, the worst of Việt Nam economy is behind now but the best has yet to come.
The Government has many things to do such as restructuring the banking system, making effective investment in infrastructure, and improving the business environment.
HSBC forecasts from now to the end 2014, Việt Nam đồng will gradually depreciate against the U.S. dollar and will hit VND21,250 by the end of this year, and VND21,500 by the end of next year.
Early this week, a report of ANZ on Việt Nam’s economy also gave forecast that the foreign exchange rate would be VND21,500 to the dollar by the middle of next year.
HSBC has revised down its projection on Việt Nam’s growth this year from 5.5% to 5.2%, while the average forecast of other institutions is 5.4%, equivalent to the target that the Government reported to the National Assembly.
The foreign bank revised up the CPI forecast this year from 5.8% to 6.7%.
HSBC also expects Việt Nam will have trade surplus of US$600 million in 2013 and trade deficit of US$700 million next year.
While ANZ in the recent report estimated foreign reserves of Việt Nam at around US$32 billion, HSBC forecasts foreign reserves of Việt Nam would be US$30 billion by the end of this year and US$35 billion by the end of next year.
By THỦY TRIỀU
Source: The Saigon Time Daily