The State Bank of Vietnam (SBV) is buying foreign currencies from the local market to increase the national foreign exchange reserves, a move it stopped for five months already, Nguyen Van Binh, Governor of the central bank, said at a conference in Hanoi on Saturday.
The exchange rate between the Vietnamese dong and the U.S. dollar has been stabilized after the SBV devalued the dong by one percent earlier this month to stop market expectation of further depreciation of the local currency against the greenback, Binh said.
The rate adjustment, taking effect on January 7, has limited the speculation of the greenback and bolstered the SBV’s foreign exchange policy, Binh said at the conference.
Regarding the future exchange rate, Binh reiterated the SBV’s orientation announced earlier this year that the dong will not be devalued by over two percent against the greenback.
With national foreign exchange reserves at over US$35 billion, this helps the central bank to make any necessary intervention at any time it wants to stabilize the market, Binh asserted.
By the end of last week, the price of the U.S. dollar traded on the interbank market had continued to fall – compared to the previous week – to around VND21,340-21,344, down VND20 week-over-week and below the price set by the transaction office of the SBV at VND21,350.
After the decision to adjust the exchange rate, the supply of foreign currency was smooth and plentiful, and the SBV began to buy from the beginning of last week when a number of commercial banks wanted to sell, according to newswire VnEconomy.
The scale of the SBV’s purchase has yet to be revealed, the newswire said.
Last month, the central bank sold more than $1 billion to stabilize the local foreign exchange market.
In recent times, the Lunar New Year (or Tet in Vietnamese) has been a time of abundant supply of foreign currency, due to rising inward remittances from overseas Vietnamese and Vietnamese people working abroad and increased demand for the Vietnamese dong for payment, according to the SBV.
Tet begins on February 19 this year but festive preparations will start around a week before it, and the celebratory atmosphere lasting four to five days after that date.
Remittances are estimated to top $12 billion last year, the highest rate ever. The SBV has forecast that the figure will rise to $13-14 billion in 2015.