Thoi Bao Kinh Te Sai Gon has quoted its sources as reporting that SBV has bought $16 billion so far this year, which has helped raise national foreign reserves to $75 billion.

The amount of foreign currencies the central bank has purchased is much higher than the $11 billion it bought in 2017 and the $6 billion in 2018. This is a record high level since 2007 and the fourth consecutive year that Vietnam in which it can maintain the positive position of BOB (balance of payment).

It’s highly possible that SBV would be able to buy more foreign currencies from the banking system. That is why SBV on November 29 unexpectedly lowered the bidding rate from VND23,200 to VND23,175 per dollar.

Regarding the BOP structure, SBVk has just publicized the figures by the end of Q2. Therefore, the picture of the foreign capital inflow in the remaining months of 2019 is still not clear.

The amount of foreign currencies the central bank has purchased is much higher than the $11 billion it bought in 2017 and the $6 billion in 2018.

However, the $16 billion is from many different sources, including the trade surplus, kieu hoi (overseas remittance), foreign direct investment (FDI) and foreign portfolio investment. The import/export activities played a very important role with the high trade surplus of $9 billion in the first 11 months of the year.

The diversity of foreign currency flows partly shows the sustainability of the overall balance. This situation is different from 2007 when Vietnam joined the World Trade Organization (WTO). At that time, foreign exchange reserves also increased to $20 billion but this mainly came from foreign portfolio investment.

And when the financial crisis happened in 2008-2009, this led to the outflow of the capital from Vietnam. The rapid volatility within a short time then caused the inflation rate to escalate by two digits in 2008 and the dong depreciated by 9.4 percent just within a year.

What will happen in 2020?

After the State Bank reduced the bidding rate, the exchange rate in the market decreased by 25 points, equal to the State Bank’s bidding rate.

This showed that banks hoped more foreign capital would flow to Vietnam in the time to come. This could be the foreign portfolio investment capital from share sale deals by Vietcombank and Military Bank, or overseas remittance.

Analysts said it is highly possible that SBV would continue buying foreign currencies in 2020 to increase the national forex reserves. It is difficult to say how much it would buy, but if the US and China can find an agreement in trade, it would not be a surprise if the central bank can buy another $10-15 billion.

Linh Ha 

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