Vietnam’s foreign reserves hit US$64 billion

At a group meeting of the National Assembly on socio-economic affairs on May 22, PM Phuc said the exchange rate has been also stable and inflation has kept under control.

Experts attributed the stability to factors such as the State Bank of Vietnam (SBV)’s flexible central rate management mechanism, which ensured that the domestic foreign exchange market was less affected by global factors.

In addition to this, the domestic supply-demand relationship with the dollar was relatively stable, thanks to foreign currency supply from exports, foreign investment, official development assistance, tourism and remittances.

The SBV affirmed it would continuously try to build up the country’s foreign reserves this year to cushion external shocks, besides supporting efforts to stabilise the forex market.

Fitch Ratings recently also forecast that Vietnam’s foreign reserves would increase to about US$66 billion by the end of this year from US$49 billion in 2017.

This year, the SBV has changed its way of purchasing foreign currency. Instead of using spot trade, the central bank has used futures contracts for the purchase of hard currencies since February 7 this year.

Previously, the bank used to buy foreign currency in spot trade, with volumes reaching US$1-US$3 billion per day, meaning that an equivalent volume of Vietnamese dong was pumped into the market in a short time.

But since February, the bank has launched three-month futures contracts to regulate the flow of currency in a more flexible way. Some 40% of the foreign reserves has been purchased through futures contracts, helping to balance cash flows to moderate the pressures on interest rates, USD/VND exchange rate and inflation.