Greenback value unexpectedly bounces back

The greenback, which people had begun to believe would never get better, has unexpectedly appreciated after a long time of sinking.

Investors might feel regret as they have missed an opportunity of making money: the dollar, which devaluated for a long time, has suddenly increased in value.

The dollar had been weeded out of the investment portfolios of many investors as it continuously devaluated for a period of time. When it fell to below the VND16,000/US$ threshold, people rushed to sell all the dollars they had, fearing that the prices would slide further. A lot of dollar-holders had to sell dollars at the very low price of VND15,300/US$.

However, the dollar price has unexpectedly increased over the last few days. Banks, which once refused to buy dollars from exporters, now are purchasing dollars at VND15,930/US$1. On the black market, the VND16,000/US$1 threshold has been regained for the first time in a year.

No one could imagine that the dollar value would rebound when all economists forecast that the dollar supply would remain profuse and the dollar would keep devaluating.

If investors bought dollars when the price was VND15,300/US$1, they would get the profit of 5% if selling now. The 5% profit is five times higher than the deposit interest rate, quite attractive if compared to securities investments.

Once again, the dollar has reminded investors about its profitability.

Why has the dollar bounced back?

The VND100/US$1 increase in the bank’s market and VND300/US$1 increase in the black market both are things which have not been seen for a year.

Analysts have cited several reasons for the recovery of the dollar:

First, the fact that the central bank widened the forex trading band (from +/- 0.75% to +/-1%) has paved the way for the real exchange rate to go up and down more rapidly, truly reflecting the supply and demand of dollars on the market.

Second, since the beginning of March, the demand for foreign currency capital of banks has increased again. The highest peak of the US$ interest rates once hit 6.9% per annum. Meanwhile, importers now need a big volume of dollars to make import deals.

Third, since the FED’s move to cut the base interest rate, the dollar value has been recovering on the world’s market, and this has led to the revaluation of the greenback in Vietnam.

Fourth, since the end of 2007, many banks have been suffering losses due to the continued devaluation of the VND. Commercial banks have raised the dollar price partially because they want to resolve that problem.

Fifth, the Prime Minister has asked the State Bank of Vietnam to purchase more dollars from exporters.

Some sources say that the demand for dollars of foreign investors seems to be increasing. Maybe it is now time for them to calculate profit and send profit home. (TBKTVN)