Vietnam’s foreign reserves have grown by more than 21 per cent since last October and by $1.5 billion during the first ten days of 2018 to reach their highest-ever level, State Bank of Vietnam (SBV) Governor Le Minh Hung told a Vietcombank meeting on January 12 on implementing tasks for 2018.

Foreign reserves, he reported, now stand at $54.5 billion, or around $9.5 billion higher than last October when Party Chief Nguyen Phu Trong quoted a figure at a major Party meeting.

The latest milestone surpasses the previous record of $51.5 billion announced at the end of December, when the central bank reported a stable US dollar exchange rate and healthy liquidity in the foreign currency market.

Foreign direct and indirect investment, inbound remittances, and local people shifting their holdings in US dollars to Vietnam dong (VND) have been major sources of foreign currency.

The central bank net bought $22 billion in total in 2016 and 2017, according to Governor Hung, ensuring lenders have liquidity to lend at lower interest rates without having to cut the central bank’s policy rates.

Vietnam’s foreign exchange reserves fell sharply at the end of 2015, to $27.9 billion, during a campaign to curb dollar hoarding and stabilize the foreign exchange market.

After a series of devaluations in 2015, the central bank moved to a more market-based framework of setting the currency in 2016, adjusting the VND’s reference rate on a daily basis.

Vietnam previously used a system that permitted the VND to trade around a fixed range that the central bank adjusted from time to time.

The SBV was one of only a handful of Asian central banks to ease monetary policy last year, unexpectedly cutting its benchmark interest rate for the first time in three years, in July.

The USD/VND rate in the banking system has been stable this week. The buying rate at major lender Vietcombank stood at VND22,675 on January 12.

VN Economic Times