Forex reserves soar as central bank boosts dollar buying

23.10.2016

The State Bank of Vietnam (SBV) last week bought more than US$100 million, sending the nation’ s foreign exchange reserves to an all-time high of more than US$40 billion.

The exchange rate stood at VND22,300 to the dollar on the interbank market on Monday and Tuesday, and then edged up to VND22,306-22,307 a dollar when the SBV bought the greenback, coupled with rising dollar demand of big companies.     

Meanwhile, the reference exchange rate between the two currencies, set by the central bank, exceeded VND22,000 a dollar at the end of last week.

SBV Governor Le Minh Hung told a recent cabinet meeting that Vietnam’s foreign exchange reserves hit an all-time high of over US$40 billion. In the year to end-September, the central bank had withdrawn about US$11 billion from the banking system when market conditions were favorable.

The sum can cover three months of imports but the central bank will likely buy more dollars to further increase the foreign reserves. 

Last week saw the dong-dollar exchange rate edging down by VND2.4 from the previous week to VND22,301 per dollar. In contrast, the average daily reference exchange rate climbed VND32.4 to VND21,995 per dollar.

On Tuesday morning, the exchange rate reached VND22,309-22,310 on the interbank market, and dropped slightly to VND22,306-22,307 at the end of the day given ample liquidity and supply.

The SBV on October 19 announced the reference exchange rate at VND22,011 to the dollar, down VND9 from Tuesday, meaning commercial banks could trade the dollar in the range of VND21,351 and VND22,671.

Credit institutions attributed the exchange rate’s fluctuation to the dollar supply and demand of big enterprises. Dollar supply is abundant now while demand is forecast to surge in the final months of the year.

Besides, the disparity between domestic and global gold prices will affect the dong-dollar exchange rate.

Banks expected the exchange rate to drop to around VND22,300 a dollar in the coming time given good dollar supply.

A banking expert told the Daily that liquidity in the banking system will likely remain ample and October’s consumer price index (CPI) may inch up by 0.2-0.3% month-on-month. Therefore, the exchange rate will hover around VND22,300 to the dollar in the short term.

On world markets, the greenback has weakened after surging to a seven-month high amid lower-than-expected inflation in the U.S., so investors expect an interest rate hike by the U.S. Federal Reserve could happen in December.  

Gold went up for the third session in a row on October 19 morning thanks to rising demand. Spot gold climbed 0.56% to US$1,262.24 an ounce.

At home, a tael of gold was bought at VND35.43 million and sold at VND35.65 million on October 19 morning. The local gold price was VND1.5 million higher than the global one. 

As of 3:27 p.m. on October 19, Saigon Jewelry Company (SJC) bought the yellow metal at VND35.44 million a tael and sold it at VND35.67 million a tael. A tael equals to 1.2 troy ounces.

Source: Vietnam.net

Photo: File