Businesses are busy buying dollars to pay their debts at the end of the year. Right now the dollar price is relatively low, but many fear it will become more expensive in the last months of 2010.

According to HCM City Statistics Office, outstanding loans in foreign currencies provided by city banks increased by 41.5 percent over the same period of 2009, reaching $8.337 billion. Although no official statistics about total outstanding loans in foreign currencies has been released, analysts believe it will be a very high figure.

Bankers have explained that most foreign currency loans are short-term, because borrowers want to decrease risk. Borrowers worry that the dollar price might increase, which would make their debt heavier.

From now to the end of the third quarter of 2010 is the time for businesses to pay these debts. Most less-than-6-month term loans have matured, while longer-term loans will mature in September and October. Therefore, now is the right time to collect dollars.

Le Xuan Bach, Director of Vinh Hoang Xuan Trade Company, has noted that his company borrowed nearly two million dollars and the loan will mature soon. “We must collect dollars right now, when the price is relatively low. I think the dollar price will be higher in the time to come, because the dollar always rises in the last months of the year,” Bach noted.

According to Dr. Chu Viet Anh from SBV, the dollar price always increases in the late second quarter and early third quarter. The tendency to borrow dollars instead of dong pushes dollar demand high. High inflation, the rising trade and budget deficit will all make the dollar supply short in the last months of 2010.

Businesses and banks normally worry that the dollar supply will be short, but actions taken recently by SBV have expanded concerns.

Most recently, SBV asked commercial banks to report weekly totals of foreign currencies they sell and foreign currency loans they provide to clients. This is the second consecutive time that SBV has sent a signal on controlling foreign currency trade and loans.

This action, in the eyes of financial analysts, demonstrated that SBV is also concerned about the trade deficit and the possible imbalance in foreign currency supply and demand in the last months of 2010.

Tightening sales and lending in foreign currencies will make it more difficult to purchase and borrow money in foreign currencies.

Source:vietnamnet