Central bank ready to sell the dollar to stabilise forex market

This morning, though the central bank continuously increased its reference rate for the dollar against the đồng by 6 đồng to VNĐ22,137 per dollar against yesterday, commercial banks lowered their offering rates by 20-31 đồng compared to yesterday.

Vietcombank cut the buying and selling rates by 70 đồng and 20 đồng to list the rate at VNĐ22,670/VNĐ22,770 per dollar.

Also, the buying/selling rates at Eximbank, Techcombank, ACB and Sacombank were down 40 đồng and 25 đồng to VNĐ22,670/VNĐ22,770.

Late yesterday, Deputy Governor of the State Bank of Việt Nam (SBV) Nguyễn Thị Hồng said that the sharp strengthening of the US dollar against the Vietnamese đồng in the domestic market over the past two weeks was mainly due to market sentiment, and the central bank is prepared to sell dollars to stabilise the market.

According to Hồng, the strengthening of the dollar in the domestic market during the past few days has been normal, as the central bank, early this year, regulated the đồng/dollar exchange rate, using a more flexible and market-based methodology, by setting a daily reference rate versus the dollar. Commercial banks are allowed to trade the dollar at +/-3% on either side of the reference rate, or between VNĐ21,423 and VNĐ22,749.

Hồng further said that in the local forex market, no sudden rise in the demand and supply for the dollar has been reported in the past weeks. Liquidity in the banking system also remains good, helping commercial banks meet the legal dollar demand of individuals and institutions in a timely manner.

According to the central bank, there have been favourable conditions for the demand and supply of the dollar, through the year-end, thanks to increasing capital inflows of foreign direct investment disbursements, overseas remittances and export value. The demand for the dollar, meanwhile, is forecast not to be high.

To reduce the dollar demand at the year-end, the central bank has recently decided to allow credit institutions and foreign bank branches to continue issuing short-term foreign currency loans to some borrowers till the end of 2017, instead of December 31, 2016.

Hồng affirmed that it would closely watch the domestic and global monetary markets, as well as Việt Nam’s macro-economic movement, to adopt effective measures for stabilising the market.

“The central bank is ready to sell the dollar to intervene in the forex market,” she said.

SBV has yet to tap into its foreign currency reserves of more than US$40 billion - a record high in recent years – to intervene in the forex market, though the dollar is appreciating considerably against the đồng.

Last year, SBV reportedly sold nearly $10 billion to banks to dampen the wide fluctuations in the local forex market after the Chinese central bank dumped the yuan.