But the fight against dollarisation is expected to face challenges after the dollar began to strengthen against the dong on both the official and unofficial markets after the US presidential election results were announced last November and the Federal Reserve recently unveiled a roadmap to raise the interest rate on US dollar.
On February 23, the central bank of Vietnam had to hike the reference VND/USD exchange rate to a record high of 22,231 VND. Following this, some banks raised their dollar selling and buying rates by 5 VND.
State giant Vietinbank hiked its buying rate to 22,795 VND per dollar and selling rate to 22,790 VND.
The highest selling prices of between 22,870 VND and 22,880 VND were at ACB, Techcombank and DongABank.
The volatility in the greenback and new policies announced by the new US government are expected to affect the volume of the dollar pouring into Vietnam starting this year.
Analysts said the higher value of the dollar encourages individuals and institutions including banks to deposit their dollar holdings abroad to enjoy higher interest rates since the deposit interest rate in Vietnam is still zero.
Meanwhile, the protectionism US Government will have to apply high tariffs on imports, including of Vietnamese goods.
This means exports to the US are likely to drop and affect the country’s foreign exchange reserves.
Vietnam’s foreign exchange reserves could also be affected by falling remittances by Vietnamese-Americans due to the US’s policy of tightening its immigration laws, which is likely to worry the ethnic Vietnamese living there and cause them to hoard their money.
Meanwhile, dollar demand remains high in the domestic market to pay import bills.
This high demand is seen from the fact that though the central bank has for a long time been planning to stop banks from lending in foreign currencies to exporters, it has not been able to achieve this.
In its Circular 31, the central bank has allowed exporters to borrow in foreign currencies until the end of this year.
In the event, many experts have suggested that the central bank should remove the zero interest rate policy to be able to further mobilise the greenback.
But the problem with this is that it could again cause people to hoard dollar