Vietnam’s foreign reserves has increased by 130 per cent to nearly $64 billion in the past two-and-a-half years, prime minister Nguyen Xuan Phuc said.
At a group meeting of the National Assembly on socio-economic affairs on Tuesday, Phuc said the exchange rate has been also stable and inflation has kept under control.
Experts attributed the stability to factors such as State Bank of Vietnam (SBV)’s flexible central rate management mechanism, which ensured that the domestic foreign exchange market was less affected by global factors.
In addition to this, the domestic supply-demand relationship with the dollar was relatively stable, thanks to foreign currency supply from exports, foreign investment, official development assistance, tourism and remittances.
SBV affirmed it would continuously try to build up the country’s foreign reserves this year to cushion external shocks, besides supporting efforts to stabilise the forex market.
Fitch Ratings recently also forecast that Vietnam’s foreign reserves would increase to about $66 billion by the end of this year from $49 billion in 2017.
This year, SBV has changed its way of purchasing foreign currency. Instead of using spot trade, the central bank has used futures contracts for the purchase of hard currencies since February 7 this year.
Previously, the bank used to buy foreign currency in spot trade, with volumes reaching $1-3 billion per day, meaning that an equivalent volume of dong was pumped into the market in a short time.
But since February, the bank has launched three-month futures contracts to regulate the flow of currency in a more flexible way. Some 40 per cent of the foreign reserves have been purchased through futures contracts, helping to balance cash flows to moderate the pressures on interest rates, US dollar/dong exchange rate and inflation.
On Wednesday, SBV set the daily reference exchange rate at VND22,584 per dollar, down by VND11 against the previous day.
With the current trading band of +/- three per cent, the ceiling rate applied to commercial banks during the day is VND23,261 per dollar and the floor rate is VND21,907 per dollar.
Major commercial banks, such as Vietcombank, on Wednesday listed the USD/VND exchange rate unchanged from the previous day, buying the greenback at VND22,735 and selling it at VND22,805.
Last week, commercial banks devalued the dollar against the dong by VND2.4 on an average, listing the dollar at VND22,766.4. Meanwhile, the daily reference exchange rate quoted by SBV increased by VND2 to VND22,568.
The week saw the US Dollar Index in the global market rise by 0.9 per cent against other major currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, to 93.45 points.
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