Vietnam's central bank reiterated that it would keep benchmark interest rates unchanged until early 2010, and pledged on Wednesday to boost dong liquidity at banks when necessary by purchasing their foreign currencies.
The central bank's assurance came after it conducted a review of its interest rate subsidy scheme and monetary policy for the coming months, when dong shortages may hit banks due to year-end corporate demand for commitments such as debt repayment and bonus payouts.
The central bank said the base rate, the refinancing rate and the compulsory reserve ratio will be kept unchanged for the rest of 2009 and in early 2010.
The State Bank of Vietnam, the central bank, said in a statement it will also adjust the interbank exchange rate in line with market movements to ensure "attaining the target of keeping stable the value of the Vietnamese dong".
The dong fell more than 2 percent in the past week to touch this year's low of 18,700 dong per dollar on the unofficial markets on Wednesday as gold traders sought more dollars to pay for imports.
Currency dealers in Hanoi and Ho Chi Minh City said domestic gold prices had been about 5 percent higher than international prices over the past week due in part to a government ban on official gold imports, triggering cross-border gold smuggling to take advantage of the spread.
"The dong's fall is caused by a big sudden jump in dollar demand from gold smugglers to pay for gold purchases, mainly in Cambodia," one trader in Ho Chi Minh City said.
Hanoi banned gold imports in May last year as it sought to conserve foreign exchange and contain the country's quickly widening trade deficit, which eventually sent the dong to its all-time low of 19,400 dong per dollar in June 2008.
Since then, banks and gold trading houses have been lobbying the government to lift the ban, citing a fall in domestic physical gold supply, but so far there have been no signals Hanoi is considering relaxing the rule anytime soon.
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