State Bank of Vietnam headquarters in Hanoi.(Photo: SBV)The value was equal to some 11% of Vietnam’s foreign exchange reserves. Thecountry’s foreign exchange reserves are currently at more than 100 billion USD,equal to 3.1 months of imports, and are forecast to keep rising. The value,which is four times higher than in 2015, is expected to be an important bufferto stabilise the domestic forex market and help the country’s economy withstandexternal shocks.
According to VDSC, the SBV’s move was aimed to restrict the devaluation of theVietnamese dong, reduce pressure onthe foreign exchange rate and balance the supply and demand of the greenback inthe domestic forex market.
In the context that most currencies have fallen significantly against the USdollar after the Federal Reserve raised interest rates, the dong has onlyweakened against the US dollar by around 2% so far this year, which shows the dongis relatively stable and listed among currencies with the lowest devaluation inthe Asia-Pacific region.
According to VDSC, despite several net withdrawals of the dong through the sale of the dollar andT-bills, domestic demand for the greenback remains strong. It has shown nosigns of cooling down as the interest rate of dollar loans in the interbankmarket continues to increase and the rate gap between dollar and dong loans in the interbank market alsokeeps rising.
In the short term, VDSC expects the SBV will continue to use the foreign exchangereserves and the T-bill sales to withdraw the dong in the open marketoperation (OMO) to reduce the dong liquidity in the banking system so asto curb pressure on the exchange rate.
VDSC forecast the domestic exchange rate might be under higher pressure atyear-end. However, it still expects the dong to depreciate only about2.0-2.5% in 2022, remaining unchanged against its previous forecast.
Pham Chi Quang, deputy head of the SBV’s currency policy department, last monthaffirmed that with foreign exchange reserves of more than 100 billion USD, thecentral bank will continue to sell its foreign currency to stabilise themarket.
The SBV will continue to manage the currency exchange rate with flexibility toabsorb external shocks, help stabilise the macro economy and control inflation,according to Quang./.
VNA
