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Central bank looks to stabilize exchange rate
The Saigon Times Daily
Wednesday,  Jan 31, 2018,18:21 (GMT+7)

Central bank looks to stabilize exchange rate

The Saigon Times Daily

HCMC – Though the domestic currency is getting firmer against the U.S. dollar, the central bank aims to stabilize the exchange rate to support exports, Nguoi Lao Dong newspaper reported. 

The U.S. dollar-Vietnam dong exchange rate is forecast by a Standard Chartered research group to ease to around VND22,650 in quarter two and VND22,600 at the end of the year, largely owing to the greenback’s devaluation against major currencies over the past several weeks.

A senior official of the central bank was quoted by the newspaper as saying that with record foreign reserves of nearly US$55 billion and the continued buying of foreign currencies in the past days, the central bank is capable of interfering in the market and keep the exchange rate stable.

The central reference rate on Monday was VND22,426 to the dollar, allowing banks to trade the greenback within a band of 3% either side. The dollar price quoted at commercial banks has been quite stable, VND22,675 for buying and VND22,745 for selling.

The dollar price was pretty stable last year when the central exchange rate picked up 1.5-1.7% against the year’s beginning. The rate at banks dropped by 0.2% and on the informal market fell by around 1.5%.

Nguoi Lao Dong newspaper quoted a gold shop owner in HCMC’s District 9 as saying that customers mainly come to sell dollars and the buying demand is not as high as before. The dollar price on the informal market has declined and come closer to the rate at banks.

According to the National Financial Supervisory Commission, the interest rate gap between the Vietnam dong and the U.S. dollar remains big, at 6-7% annually, prompting many people to choose the local currency to earn a higher deposit rate.

Foreign currency mobilization rose by some 4% last year, and the central bank has bought around US$7 billion from the banking system. This has indicated that a large volume of foreign currency has been sold for the dong currency.

Vietnam’s foreign reserves rose to about US$52 billion late last year. In the middle of this month, governor Le Minh Hung of the central bank said that an additional US$2.5 billion had been bought.

Pham Thanh Ha, director general of the central bank’s Monetary Policy Department, told the local newspaper that the central bank has kept buying foreign currencies when supplies are abundant and continuously used regulatory tools to balance Vietnam dong supplies and foreign currency purchases.

Hung said that when the State got US$4.8 billion from a divestment from Sabeco, the central bank bought US$3.8 billion and left the rest for the market absorption.

According to Ha, banks are more confident in the exchange rate stability than early last year. The concern for now is how to stabilize the domestic currency and support exports.

As forecast by Standard Chartered experts, the exchange rate will be kept stable and may fluctuate around VND22,600 per dollar late this year. Though the U.S. Federal Reserve (Fed) is to revise interest rates two more times this year, the greenback is weakening against other currencies.

The Vietnam dong is appreciating against the U.S. dollar, but to retain competitive advantages for local exports, the central bank has adjusted the exchange rate in relation to other currencies like the Chinese yuan, the euro and currencies of emerging markets, according to FX strategist Eddie Cheung of Standard Chartered.

Many securities companies have also forecast the exchange rate will be stable this year thanks to bountiful foreign reserves, revenues from initial public offering (IPO) and capital divestment from enterprises.

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