Vietnam Able to Keep Currency Stable with Record Forex Reserves: Central Banker

The dong has been one of the most stable in Asia this year, weakening 1.3% against the U.S. dollar since the start of this year.

With forex reserves reaching a new record high, the Vietnamese central bank is able to keep the dong, the local currency, stable for the rest of the year, Bloomberg quoted a central bank official as saying.

With the reserve fund hitting $45 billion, “we are confident that we will be able to maintain the dong’s value,” in 2017, Nguyen Thi Hong, deputy governor of State Bank of Vietnam, said on the sidelines of the APEC Finance Ministers’ meeting in the central province of Hoi An last weekend.

“Such a high level of foreign reserves will allow us to step in to stabilize the money market when needed,” she noted.

After several devaluations of the dong in 2015 due to volatility in the international markets, the Vietnamese central bank adopted a more market-based framework of setting the currency in January 2016, adjusting the USD/VND fixing on a daily basis.

The currency has been one of the most stable in Asia this year, weakening 1.3% against the U.S. dollar since the start of this year. The dong is predicted to devalue around 2% this year, according to brokerages and economists.

With rising remittances, foreign direct and indirect investment, the central bank has been building up its forex reserves over the past two years.

The State Bank of Vietnam will ensure lenders have enough liquidity “so that they can lend at lower interest rates,” Hong said. “By helping banks with more cash availability, we will be able to bring down lending interest rates at banks without having to cut our policy rates.”

The Vietnamese government is striving to achieve its economic growth target of 6.7% set for this year while taming inflation at below 4%.

Tuan Minh / BizLIVE