Thread: Vietnam devalues currency 2.1%

Thai agri exports immune to dong devaluation

Thailand's agricultural export, particularly rice, would stay immune to negative impacts from the dong devaluation, said Commerce Permanent Secretary Yanyong Phuanrach.

He noted that Vietnam's white rice was quoted nearly US$100 per tonne lower than Thailand's white rice late last year, but now the price at $430-$450 is $40-$50 lower. Vietnam realised that dong devaluation would also pressure the rice prices which would hurt its farmers, he noted.

He insisted that Thailand has the strategy not to enter into a price war when it comes to rice exports, as Thai product is of higher quality. As such, the devaluation would not affect the Thai agricultural exports.

"At the Asean minister meeting in Vietnam this week, Thailand seeks a conversation with Vietnam's trade minister over the rice market. We may forge cooperation, to cash in on the Asean Free Trade Agreement," he said.

Vietnam today devalued its currency for the third time since November, moving to reverse a slump in exports that helped to drive stocks close to a bear market.

The dong dropped 1.1 per cent to 19,320 per dollar as of 11.22am in Hanoi, after touching a record-low 19,425 as the central bank lowered the reference rate by 2 per cent.

The Ho Chi Minh City Stock Exchange_s VN Index dropped 1.7 per cent to 455.49, extending its decline from the May peak to 17 per cent, near the 20 per cent that would indicate a bear market.

nationmultimedia.com

Originally Posted by Mid

The new average interbank rate _ effective Wednesday _ will be 18,932 dong per United States dollar, compared with 18,544 previously, the bank said in a statement.

And they did this all on their own initiative.

U.S., Hanoi in Nuclear Talks - WSJ.com

Dong devaluation a threat to exports
PETCHANET PRATRUANGKRAI,
NALIN VIBOONCHART
August 19, 2010

Vietnam devalued its currency by 2.1 per cent against the US dollar yesterday as the dong tries to buck the regional trend in an attempt to rein in the country's trade deficit.

The devaluation, which the central bank announced late on Tuesday, reset the inter-bank exchange rate at 18,932 dong from 18,544 dong on Tuesday. This marked the third devaluation of the dong since last November.

Vietnam's trade deficit rose to US$980 million (Bt31 billion) in July, bringing the cumulative deficit for the first seven months of the year to $7.26 billion. Analysts said the devalued currency should support Vietnamese exports, and especially increase the competitiveness of low-valued-added products.

Barclays Capital said Vietnam's trade deficit was more than offset by investment inflows of $6.4 billion and remittances of $4 billion in the first six months of the year, according to MarketWatch.

"Overall, we continue to expect the balance of payments to post a surplus, allowing the country to build [foreign exchange] reserves," Barclays' strategist was quoted as saying in a note.

Barclays said it expected a trade deficit for the year of $13 billion, though that would be offset by expected foreign-direct-investment inflows of $10 billion and remittances of up to $6 billion.

Meanwhile, in contrast with the dong, the baht has gradually appreciated by 3 per cent in the past month. Pornsilp Patcharintanakul, deputy secretary-general of the Board of Trade, said Thai exports could face more difficulty in competing with Vietnam, as the dong is weaker by more than 10 per cent since 2008.

"While the baht has been stronger, the retail price gap between Thai and Vietnamese goods will widen. This would make it more difficult for Thai goods to be competitive," Pornsilp said.

Thai exports' competitiveness has been affected not only by the devaluation of the dong but by Vietnam's lower labour and production costs, he said. Many of the targeted export markets that prefer low-priced goods would buy Vietnamese instead of Thai goods.

The Thai government's target of achieving 20-per-cent export growth this year may not be achieved easily because of the devaluation of the dong and the appreciation of the baht against the greenback, Pornsilp said.

Thanavath Phonvichai, dean of the Economic Faculty of the University of the Thai Chamber of Commerce, said exports would inevitably be affected by the devaluation of the dong, as the baht has been stronger against the US dollar.

"Many export products are directly competing with Vietnam. The government must closely monitor the baht's movement to ensure our export competitiveness with our rivals. So far, Thai exports have been able to compete with other countries such as China and Malaysia, as their currencies have not weakened," he said.

Sombat Chalermwutinan, president of Asia Golden Rice, Thailand's largest rice exporter, is worried that the dong devaluation will affect Thai rice exports in the medium and long terms, though the price of Vietnamese rice has increased recently.

"Currently, Thai rice exports may not be affected by the devaluation of the dong, as the price of Vietnamese rice is increasing at the end of its harvest season. However, the price of Vietnamese rice could be much lower again compared with Thai rice after the devaluation of its currency," he said.
The price of Vietnamese rice has increased gradually, from $350 in the past few months to $400-$405 a tonne for 5 per cent white rice. Thus the price gap between Thai and Vietnamese rice has been narrowed from $100 to $30-$40 a tonne.

However, Thai government officials have not worried much about the devaluation.

Yanyong Phuangrach, permanent secretary to the Commerce Ministry, said the devaluation of the dong by Vietnam's central bank would have only a minimal impact on Thai exports, as Thai products focused on different markets.

Moreover, Vietnam's government will not concentrate on selling rice at a low price any longer, as it has affected the country's farmers in the long run. Although the devaluation of the dong may make some products cheaper, Vietnam will not dump its rice price as in the past, said Yanyong.

He added that Thailand's and Vietnam's trade ministers would meet during the upcoming Asean Economic Ministers' meeting in Vietnam to tighten cooperation on sustainable rice prices.

Srirat Rastapana, director-general of the Department of Export Promotion, said Thai exports should not be affected by the devaluation, as Vietnam's government was more likely to be focused on reducing its trade deficit rather than driving up exports.

Although some Vietnamese goods may become cheaper, Thai exporters have high quality and after-sales service to retain their customers, she said.

The Thai Trade Centre in Ho Chi Minh City reported that Thai exports to Vietnam would face a more complicated procedure after the Vietnamese government required exporters of consumer products to seek automatic import licensing. Exporters must receive the licence by post 14 days before exporting the product to Vietnam or they will be subject to a fine.

Visit Limprana, chairman of the Food Processing Industry Club under the Federation of Thai Industries (FTI), said he believed the dong devaluation would not affect Thai food exporters in the short term, as advance orders for about three months had been secured.

Besides, he said, most of the food and agricultural products that Vietnam exports were not the same as those of Thailand. Vietnam competes with Thailand in rice exports, but now the export volume from that country is declining.

"The top three food and agricultural products we export to the world market are rice, tapiocacassava and sugar. Vietnam is not a strong player in those products," he said.

"The other worrying factor is climate change, which has a direct impact on productivity and eventually product prices. The dong devaluation is just a minor worry compared with the impact from climate change."

Kasikorn Research Centre expects the devaluation of the dong to hit Thailand's agricultural exports, especially rice, rubber, shoes, garments and value-added seafood products.The Vietnamese dong devaluation is expected to boost the competitiveness of Vietnamese products in global market.

The Thai exporters might have to face a furious competition with Vietnam in global market. While, the strength of Baht is a factor to pressure Thailand's export.

nationmultimedia.com

Originally Posted by Mid

Thanavath Phonvichai, dean of the Economic Faculty of the University of the Thai Chamber of Commerce, said exports would inevitably be affected by the devaluation of the dong, as the baht has been stronger against the US dollar. "Many export products are directly competing with Vietnam. The government must closely monitor the baht's movement to ensure our export competitiveness with our rivals. So far, Thai exports have been able to compete with other countries such as China and Malaysia, as their currencies have not weakened," he said.

Moron Somchai forgets to take the high Vietnam inflation into consideration. Vietnam's costs soar 8% yearly, so how can a 2% devaluation make them more competitive ? Fact is, Thailand keeps having a huge trade surplus, and Vietnam a huge trade deficit.

Originally Posted by dirtydog

Would be a sensible idea for Thailand to devalue the baht a little bit before the tourist season, it aint cheap here anymore.

How would expect the BOT to do that exactly? Vietnam employs a pegged range (and has the black market to show for it), Thailand is a free float that the BOT monitors and trys to keep stable. All evidence is the BOT have pretty much done all they can do in efforts to keep it from getting even stronger.
TH

Originally Posted by wefearourdespot

Originally Posted by Mid

Thanavath Phonvichai, dean of the Economic Faculty of the University of the Thai Chamber of Commerce, said exports would inevitably be affected by the devaluation of the dong, as the baht has been stronger against the US dollar. "Many export products are directly competing with Vietnam. The government must closely monitor the baht's movement to ensure our export competitiveness with our rivals. So far, Thai exports have been able to compete with other countries such as China and Malaysia, as their currencies have not weakened," he said.

Moron Somchai forgets to take the high Vietnam inflation into consideration. Vietnam's costs soar 8% yearly, so how can a 2% devaluation make them more competitive ? Fact is, Thailand keeps having a huge trade surplus, and Vietnam a huge trade deficit.

The price of oil pretty much decides if Thailand has a trade surplus or not. Last month was not too good.
TH
First trade deficit this year

• Published: 19/08/2010 at 03:34 PM
• Online news: Breakingnews

Thailand last month recorded its first trade deficit since the beginning of the year at US$939 million, Commerce Minister Porntiva Nakasai said on Thursday.

Mrs Porntiva said the exports in July totalled US$15.56 billion, up 20.6 per cent year-on-year, while imports reached a 23-month high of $16.5 billion, up 36.5 per cent.

However, the export sector expanded 34.1 per cent in the first seven months of this year, with a trade value of $108.63 billion, while the imports rose 49.0 per cent to $103.19 billion, resulting in a trade surplus of $5.43 billion.

The Commerce Ministry forecast that 2010 exports would grow 20 per cent to an expected value of $183 billion.

^a sign of things to come?

Originally Posted by Mid

The new average interbank rate _ effective Wednesday _ will be 18,932 dong per United States dollar, compared with 18,544 previously, the bank said in a statement.

A tremendous difference