Vietnam’s forex reserves soar to record-setting US$48 billion
Vietnam’s foreign currency reserves hit approximate US$48 billion thanks to the country’s stable macroeconomic conditions and strong influx of exports, foreign direct investment (FDI) and remittance, according to State Bank of Vietnam (SBV)’s Governor Le Minh Hung.
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It meant that the SBV has brought in another US$3 billion worth of hard currencies over the past month.
Previously, Governor Hung told National Assembly deputies on November 16 during a plenary session that the bank had increased its buffer fund by US$7 billion in 11 months to bring the sum to a record high of US$45 billion.
The rise was reported in the context of the foreign exchange rate in the domestic market being relatively stable. A few years ago, the exchange rate usually fluctuated widely towards the year-end due to seasonal factors.
In particular, the USD/VND rate has undergone little change, although the US Federal Reserve raised its benchmark interest rates by 0.25 percentage points for the third time, effective December 14.
As the US rate increase was well-anticipated, the local forex market did not react negatively to the Fed’s rate announcement. The USD/VND rates were kept almost unchanged on December 15, a day following the rate hike. Across commercial banks, the dollar was traded at some VND22,675 on the buy side and VND22,755 on the sell side. The central bank’s daily fixing, however, was adjusted down by VND7 to VND22,443.
By December 14, the daily reference USD/VND exchange rate listed by the central bank increased by 1.29% against earlier this year, while the rates quoted by commercial banks and in the unofficial market declined 0.18% and 1.45%, respectively.
According to the central bank, liquidity of the domestic foreign exchange market was good and met the demands of local organisations and individuals.
Experts attributed the stability to reasons such as the SBV’s flexible central rate management mechanism, which ensured that the domestic foreign exchange market was less affected by global factors.
The Government’s policy to encourage locals to convert forex holdings into dong has also provided support. The SBV has net purchased US$8-8.5 billion worth of forex since the start of this year, higher than the surplus of US$4.8 billion in the overall balance of payments.
In addition, the domestic supply-demand relationship with the dollar was relatively stable. Foreign currency supply from exports, foreign direct investment (FDI), official development assistance, tourism and remittances grew positively in 2017.
Vietnam recorded trade surplus of US$2.76 billion in the first 11 months of the year, or 1.4% of total export turnover, according to the Ministry of Industry and Trade. The total export value during the reviewed period was US$193.75 billion and import value was US$190.99 billion, up 21.1% and 21% year-on-year, respectively.
The country’s total FDI capital in the period also reached a record high of US$33 billion, up 82.8% against the same period last year, while FDI disbursement capital also rose by 11.9% to US$16 billion.
Remittance this year is estimated at US$13.8 billion against US$11.5 billion last year, while the country is also expected to greet 13 million foreign visitors in 2017, earning a significant amount in hard currencies.
ANZ recently forecast that the dong will depreciate slightly against the dollar in the next few years, to reach VND22,900 per dollar by the end of 2018 and VND23,000 by June 2019.
