By the end of last year, the country’s forex reserves reached 63.5 billion USD. (Photo: VNA)Hanoi (VNS/VNA) - The State Bank of Vietnam (SBV) has so far thisyear bought more than 1 billion USD from commercial banks to build up thenation’s foreign currency reserves.
The latest report from Saigon Securities Co’s Retail Research cited SBVGovernor Le Minh Hung as saying that the central bank could purchase another 1-2billion USD in the next few weeks thanks to the available US dollar supply inthe domestic market.
Besides increasing the country’s forex reserves, the purchase also helpsincrease the Vietnamese dong supply source in the local market, which supportsthe liquidity of commercial banks.
By the end of last year, the country’s foreign reserves had built up to andremained at a relatively high level of 63.5 billion USD, helping the centralbank stabilise the foreign exchange rate.
Analysts from the Military Bank Securities Company (MBS) expect that thecentral bank is capable of managing the foreign exchange rate to keep it withinthe margin of safety in 2019, given the country’s abundant dollar supply andstable macro-economic balance.
Besides, the MBS analysts said, SBV’s current zero percent interest rate ondollar deposits encourages dollar holders to exchange their money to dong toget higher interest, helping the central bank manage the forex market. The gapbetween interest rates of the dong and the dollar remained high. The rate fordollar deposits is zero percent while the rate for the dong is 7-8.5 percentper year so dollar holders will still make less than if they deposit dong atlocal banks.
In addition, MBS says the dollar likely reached its peak in 2018 and will inchdown in 2019. The US Federal Reserve (Fed) will likely only raise interestrates once in 2019 instead of the four times it did so in 2018.
The reduction, together with the country’s trade surplus of 7.2 billion USD lastyear, would help reduce pressure on the exchange rate in the domestic marketthis year, MBS analysts said. They anticipate SBV will depreciate the dongagainst the dollar slightly by some 1.5-2 percent this year to support theGovernment’s targets of increasing exports and stabilising macro-economic indicators.
Besides helping build up the nation’s foreign currency reserves, the SBV’sdollar purchase has so far this year also contributed to lowering interest rateof dong loans in the inter-bank market sharply over the past few weeks. Theovernight rate slid to 3.93 percent per year on January 17 from 5 percent onthe last working day of 2018.
Interest rates for dong deposits with terms of less than one year listed atcommercial banks have been kept stable while the rates for 12-13 month depositshave inched up to 6.8-8.0 percent per year, depending on the bank.
SSI analysts forecast interest rates for dong deposits would remain unchangedfrom now until the Lunar New Year, which falls on February 5, given the stableliquidity of commercial banks. — VNS/VNA
VNA
