USD weakens as central bank mulls dollar sales

Saturday, Nov 26, 2016 10:05

An employee counts US dollars at Vietcombank’s headquarters in Ha Noi. — VNA/VNS Photo Tran Viet

The dollar weakened against the dong at commercial banks yesterday, following the central bank’s affirmation that it will sell the greenback in order to stabilise the forex market.

“We are ready to sell the dollar to intervene in the market,” State Bank of Viet Nam (SBV) Deputy Governor Nguyen Thi Hong told reporters on Thursday.

Yesterday morning, the SBV set its reference rate at VND22,137 per dollar, six đồng higher than Thursday’s level.

However, Vietcombank cut the buying rate by 70 dồng to VND22,670 per dollar and the selling rate by 20 dong to VND22,770 per dollar.

Eximbank, Techcombank, ACB and Sacombank also lowered the buying rate by 40 dong and the selling rate by 25 dong at corresponding levels.

This shift reversed a trend of a strenthening dollar happening in the domestic market over the last two weeks, with dollar rates hiking by 70-100 dong at commercial banks on Thursday, when the SBV raised the daily-adjusted reference rate to a record high of VND22,131 per dollar.

Hong said Thursday that the sharp strengthening of the dollar against the dong was mainly due to market sentiment, which tracked global market developments.

This change was normal, because the central bank had been regulating the exchange rate with a more flexible and market-based methodology this year, setting the reference rate every day and letting commercial banks trade the dollar at +/-3 per cent on either side of the rate, she said. cited a VPBank Securities report that the reference rate had increased by 1 per cent this year, and it might rise by another 1 per cent between now and the end of the year. The forecast was based on foreign trade balance and speculations of further dollar appreciation.

Economic expert Can Van Luc told the website: “There may be fluctuations, but with current operation measures and foreign reserves, we can absolutely stabilise the market.”

The 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.

Hong said no sudden rise in the demand and supply for the dollar had been reported in the local forex market over the last few weeks. Liquidity in the banking system remains strong, helping banks meet dollar demand of institutions and individuals in a timely manner.

“Our transactions with customers still take place normally these days. Demand for foreign currencies are stable and there is no speculation,” Vietcombank Deputy General Director Pham Thanh Ha told

Ha said the recent dollar appreciation would stimulate the influx of overseas remittances and the disbursement of foreign investments in Viet Nam, besides supporting exports.

Hong said the central bank would closely watch macro-economic movement--especially monetary market developments--to adopt effective measures for market stability.

The SBV has recently allowed 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, to ease demand for dollar at the year-end.

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

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