Foreign deposits from residents have been found on continuous decline since the early year and plummeted 10pct 31 July 2012 versus the end of 2011. Outstanding resident deposits, meanwhile, sharply rose above 12pct over the same period.
As such, part of the resident foreign amount could be converted into dong that would be then deposited in banks, scaling up foreign reverses in the recent times. Also, dong deposit surges have indicated improved value of local currency and increased confidence.
The cause could lie in the central bank’s favourable interest rate policies in that US dollar interest rate for residents is capped at 2pct whereas dong interest rate ranges from 10pct to 12pct. In addition, the foreign exchange between the US dollar and dong has been stabilised with an expected fluctuation range of lower than 3pct.
In addition, exchange rate policies have also enjoyed favourable conditions such as inflation easing, well control of gold market and gold smuggling. Importantly, demand for foreign currencies and exporting have weakened on economic difficulties. As a result, the balance of payment as well as foreign reserves is expected to be further improved in the time to come.
Deputy Governor of the State Bank of Vietnam (SBV) Le Minh Hung anticipated foreign currency market to be well under control and beyond significant fluctuations. Yet, exchange rates would be flexible within the given range rather than be fixed. The management policies would be in accordance with the macroeconomic management ones, he added.