The State Bank of Vietnam (SBV) has recently sold US dollar forward for the first time since 2018 to support the liquidity of the foreign exchange market.

In a newly released market report, Saigon Securities Incorporation (SSI) Research attributed the SBV's move to seasonal factors when FDI companies have repatriated their profits at the end of the fiscal year.

The liquidity of the Vietnamese dong in the system is still relatively good, it noted.

SSI Research said the dong had a relatively strong declining correction last week when pressure on the foreign exchange market appeared and the SBV sold the dollars in 3-month forward contracts to support the dollar liquidity for the market.

According to SSI Research’s analysts, besides a trade deficit of up to US$1.6 billion in the first half of April 2022, the pressure on the foreign exchange market was due to seasonal factors when FDI companies transferred their profits from Viet Nam to their parent companies at the end of the fiscal year.

In the interbank market, the USD/VND exchange rate was quoted at around VND22,960 per dollar last week an increase of VND60 compared to the previous week, while the rate listed at commercial banks was VND23,110, up VND60, and at VND23,380 on the free market, up VND25.

The dong has so far this year depreciated about 0.6 per cent against the dollar - a relatively low level compared to that of other regional currencies. However, SSI Research believed in the long term, the factor maintaining the strength of the dong is still relatively positive thanks to dollar flows from the country’s imports, exports, disbursed FDI and remittances.

Last week, the SBV continued to make net injection of nearly VND500 billion into the banking system through the open operation market (OMO), which helped the dong interest rates on the interbank market drop sharply in the week with overnight and one-week rates declining by 0.33 and 0.38 percentage points against the previous week to 1.90 per cent and 2.02 per cent.

Although the SBV has not yet released credit growth data for April, the analysts said credit has tended to slow in the context of the Government and the SBV's recent tough moves to restrict the corporate bond and real estate markets.

The liquidity in the stock market also slowed while the deposit interest rate at banks inched up which has helped increase the individual deposits at banks.

According to the latest data from the SBV, thanks to increases in savings interest rates, deposits at banks increased strongly in the first two months of this year after declining last year. Deposit interest rates at many banks have so far increased by 0.3-0.7 percentage points against late last year.

Deposits increased by 1.38 per cent to nearly VND11.1 quadrillion in the first two months of 2022. Among the total, deposits of individual customers reached more than VND5.46 quadrillion, up more than VND56 trillion against January 2022 and VND159.6 trillion against December 2021. — VNS