The State Bank of Vietnam (SBV), the country’s central bank, is selling forex to local banks to help them balance forex positions, the Saigon Times newspaper cited an executive of a major commercial bank as saying.
The executive declined to specify the amount the SBV was selling, but noted that the demand was not high.
It is unknown how the market will react if the U.S. Fed announces an interest rate liftoff after a policy setting meeting next week, but the demand-supply of the forex market in Vietnam is expected to stay stable through the year-end, the official added.
Pham Hong Hai, CEO of HSBC in Vietnam, has recently told local media that the volatility in the forex market has been ascribed to speculation of the Fed’s interest rate hike, coupled with political turmoil in several countries.
Although corporate demand for forex is about to increase, the USD/VND is likely to remain steady from now to the year-end thanks to the SBV’s pumping, the continued surplus in the balance of payments and favorable macroeconomic conditions, Mr. Hai commented.
He noted that the recent inclusion of the Chinese yuan in the IMF’s SDR basket will exert certain impact of the Vietnamese dong. However, the influence will be mitigated by the no use of the yuan in Vietnam and the country’s positive balance of payments.
The SBV has made efforts to keep the forex market steady, including forex sales and weakening the dong by 5% in the year to date. The bank had pumped an estimated $4 billion into the money market in the year to the end of August, according to Saigon Times.
Vietnam’s foreign exchange reserves declined by $6.7 billion in the third quarter of 2015, falling to $30.3 billion as of end-September, according to IMF's data.