(Adds detail, context)
HANOI Dec 1 Vietnamese Prime Minister Nguyen
Tan Dung has told the central bank to take "strong" steps to
stabilise the foreign exchange and gold markets, and requested
the finance ministry to implement price controls on certain
The calls came as the dong weakened to
21,470/21,570 per dollar on unofficial markets, nearly 10
percent below the legal limit mandated by its trading band,
and as forecasts put full-year inflation above 10 percent. The
official government target is 8 percent.
The State Bank of Vietnam should "implement in a timely
manner strong and effective measures to ensure the control and
stability of exchange rates, gold prices and interest rates",
Dung said in instructions issued on Tuesday, according to the
government's website, www.chinhphu.vn.
Unlike other currencies in that region that have been
strengthening on the back of U.S. quantitative easing, the
dong has been slipping under domestic pressures including
rising inflation, a persistent trade deficit, soaring gold
prices and widespread expectations of its weakness.
Gold prices and the dong are strongly correlated: when
gold prices rise the dollar tends to gain against the dong
On Wednesday, gold was trading in Hanoi at 36.27/36.37
million dong per tael, putting it on par with global gold
prices . One tael equals 1.21 ounces.
The central bank should cooperate with provincial
authorities to investigate and handled cases of speculation,
illegal gold trading and foreign exchange market manipulation,
Dung's instructions said.
It gave no further details.
In early November the authorities said they would not
devalue the beleaguered dong before at least Tet, the Lunar
New Year festival, which falls in early February 2011,
pledging instead to tap foreign exchange reserves to meet
The central bank also raised its three policy interest
rates by 100 basis points on Nov. 5, and also granted fresh
gold import licenses and quotas to narrow a gap between
domestic and global prices that traders said had fuelled
The dong has slipped steadily since, however, putting the
central bank and the government, which approves policy, in a
Dung's instructions also ordered the finance ministry to
keep prices for electricity, coal for power production,
cement, fertiliser and other goods stable, while using
"financial, monetary and tax measures" to stabilise prices of
The ministry should also "resolutely stop the registration
of price increases of goods and services subject to price
registration if the increases are unreasonable", it said.
That final measure could raise concern among the foreign
and local business community, which have spoken out against a
finance ministry circular that took effect at the start of
October requiring companies to register prices on a range of
products, including milk and cement, and threatening price
Vietnam's consumer price index this month will rise
1.3-1.5 percent from November, bringing annual CPI growth to
over 10 percent, Wednesday's edition of the state-run
newspaper Tuoi Tre quoted deputy industry and trade minister
Ho Thi Kim Thoa as saying.
Consumer prices in Vietnam traditionally rise in the
fourth quarter and in the run-up to Tet.
(Reporting by John Ruwitch; Editing by Miral Fahmy)