Vietnam central bank sells $5.5 bln to protect local currency

The Vietnamese central bank has sold a total of $5.5 billion worth of foreign currency since late April in a move to keep the dong devaluation in a controllable range, according to data from Ho Chi Minh City-based private bank ACB.

The State Bank of Vietnam (SBV) sold $350 million on June 24 and another $600 million to local commercial banks, according to ACB.

The SBV has scaled up its intervention to keep the forex rate stable. From April to end-May, it had sold some $2.8 billion worth of foreign currency out of its $102 billion reserve fund, including $2.4 billion in May, according to Maybank Securities Limited Company (MSVN).

The SBV started to offer hard currency on April 19 when the dong had already depreciated 4.9% against the U.S. dollar in an attempt to cool the USD/VND exchange rate.

The dong has lost 4.3% versus the greenback since the start of this year, Vietcombank data showed.

After levelling off for two weeks, the dong devaluation has gained momentum since late June due to rising forex demands and the psychological impact of a U.S. dollar rally on international markets, ACB researchers commented.

On the interbank market, the SBV last weekend started to offer 14-day treasury bills instead of 28-days notes, while keeping the coupon rate unchanged at 4.25%. This move aims to lift the interest rate curve, Maybank Kim Eng analysts said.

Interest rates on the overnight term, which has the biggest portion in the interbank market, have ticked up after the SBV raised the rate of 28-day T-bills to 4.25%. This has caused deposit interest rates at banks to increase 40 basis points.

The SBV raised its central reference USD/VND rate by VND6 to 24,264 on Thursday after the U.S. Dollar Index rose 0.45% to 106.05.

Local commercial banks lifted their quotes to VND25,227-25,447 a dollar for bids and asks, the upper limit of the daily trading band.

On the free market, gold shops continued to raise the USD price by VND70 to VND25,950-26,030 a dollar for buy and sell, marking the first time the greenback surpassed the VND26,000 threshold.

Since the start of this year, the price of the U.S. dollar has risen 5.08% on the unofficial market.