Vietnam Cbank Stocking Foreign Currencies After Intervening In Forex Market
The State Bank of Vietnam (SBV) is buying foreign currencies from the local market to increase the national foreign exchange reserves, a move it stopped for five months already, Nguyen Van Binh, Governor of the central bank, said at a conference in Hanoi on Saturday.
The exchange rate between the Vietnamese dong and the U.S. dollar has been stabilized after the SBV devalued the dong by one percent earlier this month to stop market expectation of further depreciation of the local currency against the greenback, Binh said.
The rate adjustment, taking effect on January 7, has limited the speculation of the greenback and bolstered the SBV’s foreign exchange policy, Binh said at the conference.
Regarding the future exchange rate, Binh reiterated the SBV’s orientation announced earlier this year that the dong will not be devalued by over two percent against the greenback.
With national foreign exchange reserves at over US$35 billion, this helps the central bank to make any necessary intervention at any time it wants to stabilize the market, Binh asserted.
By the end of last week, the price of the U.S. dollar traded on the interbank market had continued to fall – compared to the previous week – to around VND21,340-21,344, down VND20 week-over-week and below the price set by the transaction office of the SBV at VND21,350.
After the decision to adjust the exchange rate, the supply of foreign currency was smooth and plentiful, and the SBV began to buy from the beginning of last week when a number of commercial banks wanted to sell, according to newswire VnEconomy.
The scale of the SBV’s purchase has yet to be revealed, the newswire said.
Last month, the central bank sold more than $1 billion to stabilize the local foreign exchange market.
In recent times, the Lunar New Year (or Tet in Vietnamese) has been a time of abundant supply of foreign currency, due to rising inward remittances from overseas Vietnamese and Vietnamese people working abroad and increased demand for the Vietnamese dong for payment, according to the SBV.
Tet begins on February 19 this year but festive preparations will start around a week before it, and the celebratory atmosphere lasting four to five days after that date.
Remittances are estimated to top $12 billion last year, the highest rate ever. The SBV has forecast that the figure will rise to $13-14 billion in 2015.
Vietnam Cbank Devalues VND By 1% Against USD To 'Control Inflation'
The Vietnamese dong is devalued by one percent against the dollar on interbank transactions as of Wednesday, the State Bank of Vietnam (SBV) announced late Tuesday.
The midpoint for trading the dong shifted to 21,458 per dollar from 21,246, a level the SBV set last June, the State Bank of Vietnam, the country’s central bank, said on its website.
Dollar/dong transactions can move in a band of plus or minus one percent around the midpoint, which the central bank sets daily.
This means a range from VND21,243 to VND21,673 to the greenback following the latest midpoint change.
The SBV said the adjustment helps stabilize the foreign exchange market and enables it to “control inflation, ensure macro-economy, and boost economic growth."
"The State Bank of Vietnam will guarantee to implement measures and policy instruments to stabilize the exchange rate and the foreign exchange market on the new price level," it said.
Shortly before the State Bank of Vietnam announced the exchange rate change on Tuesday, many local banks, including ACB or OCB, sold the greenback at the central bank’s ceiling of VND21,458 a dollar, according to newswire VTC.
On the unofficial markets the dong stood at 21,560/21,575 per dollar, having advanced marginally from 21,570/21,585 the previous day, according to Reuters.
At a meeting between Prime Minister Nguyen Tan Dung and local businesses in Hanoi in September last year, Governor Nguyen Van Binh said the dollar/dong exchange rate would remain stable and would be adjusted by no more than one percent.
In mid-December, Governor Binh said the central bank would aim to keep changes in the exchange rate within two percent in 2015.
The governor also revealed at the same meeting that Vietnam's foreign reserves had risen to the highest-ever level of over $35 billion.
“This not only reflects the stability of the Vietnamese dong but also fortifies our standing in the world arena,” he said.