Foreign exchange reserves skyrocket
Vietnam’s foreign exchange reserves, exclusive of gold, reached a record high of US$38 billion in mid-June, said State Bank of Vietnam Governor Le Minh Hung.
Hung was quoted in Thoi bao kinh te Sai Gon (Saigon Times) regarding the foreign exchange reserves.
According to the SBV, it bought roughly US$8 billion in the first 5-1/2 months, in a bid to increase foreign reserves. The purchase was smooth thanks to ample supplies in the domestic market.
Further, Hung expects the forex reserves will continue to rise this year.
However, he said the nation’s foreign reserves in gold remain low.
Hung noted that the domestic gold and forex markets are faring well. The US dollar strengthened against the Vietnamese dong some weeks ago, but it still appreciated within the allowable band. The central bank reduced dollar buying at that time, before resuming purchases at a normal pace.
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Further, the governor praised the application of the average daily inter-bank exchange rate between the dong and the greenback with calculations based on developments with the Chinese yuan and other strong currencies.
As for some foreign-invested enterprises that have large revenues in foreign currencies from export activities and deposits at wholly foreign-owned banks in Vietnam, Hung said the SBV strictly monitors their export-import payments in foreign currency.
According to analysts from the VP Bank Securities, significant forex reserves would help the central bank successfully control the domestic foreign exchange market in upcoming quarters, in the context of volatility in the global economy.
This is an improvement since the country’s reserve fund dwindled to US$9 billion in 2010 due to large trade deficits that undermined confidence in the đồng.
Former SBV Governor Cao Sy Kiem attributed the rise in foreign reserves to the country’s macro-economic stability and SBV’s success in taming the forex market, lifting confidence in the dong and reducing the dollarisation in the economy.
According to the central bank, the rise in forex reserves has also contributed to enhancing Vietnam’s position on the international market, as shown by the interest rate of bonds issued in international markets, which has fallen sharply from 7.2% to 4.8% in 2015. This helped reduce the cost of the Government’s foreign borrowing.
The hike in foreign reserves will also help increase confidence of investors in Vietnam’s macro policies and enhance the effectiveness of the country’s monetary policy regulation, the central bank said.
