The State Bank of Vietnam (SBV) has raised the bid price for the US dollar by over 1 percent, from VND20,826  per dollar to VND21,100.

Meanwhile, the ask price for the greenback at the transaction offices of SBV remains at VND21,130 per dollar. The average interbank rate has still been quoted at VND 21,036 per dollar.

It is an unexpected move as the central bank had held the rate steadily for over one month after the devaluation in late June.

SBV devalued the dong by 1 percent against the greenback by adjusting the interbank rate on June 28, 2013.

However, according to many experts, the move took place when the liquidity of greenback on the local market has become abundant, and the rates quoted at local banks have become stable.

Besides, the use of the US dollar to import gold for SBV-hosted bidding sessions also offered rooms for SBV to buy more dollars to enrich the national foreign exchange reserves.

According to newswire Vneconomy, in the week following the devaluation, the local banking system had to sell a hefty amount of the greenback to meet rising demand. SBV also had to intervene by pumping out more dollars to stabilize the market.

Further devaluation?

In a recent interview with Hai Quan newspaper, Dr. Le Xuan Nghia, former vice chairman of the National Financial Supervisory Commission cum a board member of the Prime Minister’s economic advisory board, said depositing and lending rate may fall if the Prime Minister gives the green light for another 1-percent dong devaluation.

During a recent meeting of the board with the Prime Minister recently, the board has discussed bank rates, and realize that SBV is no longer able to cut interest rates again.

“But if the Prime Minister agreed to allow this to happen by the end of this year, it will open up opportunities to reduce interest rates,” he said, adding that the move will allow the central bank to cut rate by 0.5 percent.

SBV early this year said it will “flexibly manage the forex rate between the local currency, the dong, and the US dollar”, and if any devaluation takes place, the range will not exceed 2-3 percent in total in 2013.

The SBV statement was released in the face of ample forex reserves. The national foreign exchange reserves have been reported to surpass $30 billion, reaching the equivalent of 12 weeks of imports following international practices.