According to Saigon Securities Incorporation (SSI), the foreign exchange reserves of Vietnam are likely to further increase thanks to the good foreign currency status of commercial banks.
Stable exchange rate
The foreign exchange market continued stable trend in the early days of the week, the exchange rate even slightly declined. Accordingly, on October 15th session, the central reference rate as kept unchanged by the State Bank of Vietnam (SBV) at 23,150 dong per US dollar after being cut by four dong in the previous session. With a trading amplitude of +/-3 percent, the floor exchange rate is currently 22,455 dong per US dollar, and ceiling exchange rate is 23,845 dong per US dollar. The US dollar selling rate of the SBV also remained the same as on October 14th, being at 23,200 dong per US dollar (buying) and 23,795 dong per US dollar (selling).
The US dollar buying and selling rates at banks did not see many fluctuations. For example, Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) kept the trading price of the greenback unchanged at 23,115 dong per US dollar (buying) and 23,265 dong per US dollar (selling). Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) also listed the same US dollar selling rate as on October 14th, reaching 23,140 dong and 23,260 dong per US dollar, etc. In general, the current US dollar buying rate of banks is still popular at 23,130 23,140 dong per US dollar, while the selling rate is ranging from 23,250 to 23,260 dong per US dollar.
The stable movements of the exchange rate have been maintained throughout the third quarter. Accordingly, by the end of September 2019, the central exchange rate had risen by 1.5 percent while the actual trading exchange rate at banks almost saw no change compared to the end of 2018.
The stable trend of the exchange rate continued to be seen in the early days of October. In the last week, the exchange rate even recorded a slight decline along with the depreciation of the US dollar on the world market. Compared to the end of September, the central reference exchange rate has been adjusted down by 11 dong, while banks’ exchange rate has fallen by 10 dong per US dollar to 23,110 23,260 dong per US dollar. Thus, compared to the end of 2018, the US dollar buying rate of commercial banks has dropped by 0.24 percent. “Stable international developments and abundant foreign currency supply in the domestic have made the US dollar/dong to continue decreasing slightly,” said SSI.
Indeed, after moving sideways in the early days of the last week to wait for the results of the US China trade talk, the US dollar dropped sharply in the last trading session of the last week after the talk ended with the US approaching the first phase agreement with China. Currently, the US dollar index is moving around 98.40 points, down by one percent compared to the peal level of 99.38 points set in the end of September this year.
Record high foreign exchange reserves
SSI’s information showed that the SBV continued to buy a large amount of foreign currencies and the foreign exchange reserves have reached more than 70 billion US dollars. The reserves are most likely to increase further because the foreign currency status of commercial banks is currently very good and the SBV’s buying rate is still higher than the buying rate of commercial banks (23,200 dong per US dollar).
SSI estimate is quite similar to the forecast of 71 billion US dollars of foreign exchange reserves provided by the Institute of Economic and Policy Research (VEPR) at the similar to announce the macroeconomic report in the third quarter of 2019 held recently.
Although that is a new record, VEPR still assessed that it is only a safe level compared to the current commercial scale. “The SBV should balance the increase in foreign exchange reserves with the handling of the US’s accusation of currency manipulation,” VEPR noted.
Talking about the exchange rate developments in the last months of the year, VEPR said that in the near future, the central reference rate will maintain an insignificant uptrend due to three factors. The first factor is the instability of the US dollars against the declining production and the blame of President Trump on the US Federal Reserves for maintaining high interest rates. The second reason is the ongoing tensions related to the US China, US Iran, Japan South Korea. The last factor is the SBV’s caution in operating the foreign exchange market to avoid the US’s accusation.
Meanwhile, Bao Viet Securities Company believed that in the last three months of 2019, the dong is likely to depreciate against the US dollar because the trade balance may see less trade surplus in the last quarter of the year and the unpredictable movements of the US China trade war. However, the pressure of the dong depreciation is not significant. In general, the dong devaluation for the whole year of 2019 will be less than two percent.
