VIETNAM INTERVENED IN CURRENCY MARTS WEEKS AFTER U.S. CENSURE

After being branded a “currency manipulator” by the United States in December for trying to keep the dong from rising in value, Vietnam is again intervening in foreign exchange markets and using what traders say is an unusual method to do so, according to six people familiar with the matter and a review of an interbank trading message.

Early in January, the State Bank of Vietnam (SBV) told some local banks it would cease its regular purchase of US dollars in the spot market, where the trade settles within days, according to two senior currency traders and an analyst, who all work at local banks and have direct involvement in the trades, Phuong Nguyen ad Tom Westbrook reported for Reuters.

The central bank offered the local banks an attractive deal instead: It would agree to buy dollars at a favorable rate for delivery in July, and it would allow the local banks to cancel this agreement before mid-June if they wished, according to the three sources and a review of trading instructions sent by the SBV for one such transaction.

The new method of intervention, which has not been previously reported, put downward pressure on the dong but without money changing hands right away, which the sources said could help avoid drawing US attention to the trades and any further consequences for bilateral relations.

The SBV did not respond to requests for comment. There is no suggestion of any wrongdoing by Vietnam. Many central banks intervene regularly in currency markets. Vietnam has consistently said its currency policies aimed to maintain stability and control inflation, not seek trade advantage.

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