VINACHEM

The domestic foreign exchange market on Thursday, Dec 17, remained relatively stable after the United States (US) Federal Reserve raised its benchmark interest rate by a quarter of a percentage point.

The Federal Reserve rate was between 0.25 percent and 0.50 percent for the first time in nearly a decade.

Though still listing the selling rate at the cap of VND22,547 regulated by the central bank, domestic commercial banks yesterday still kept a gap between the selling and buying rates, quoting the buying rate between VND22,460 and VND22,517, the same as the past few days.

According to industry insiders, the gap between the selling and buying rates shows a relative balance in dollar supply and demand in the local forex market.

In the inter-bank market, the rate was also unchanged at VND21,890 on Thursday.

Deputy Governor of the central bank Nguyen Thi Hong yesterday said that the commercial banks still timely met dollar demands of local enterprises and people.

Hong said that the rising forex market in the recent past was mainly due to the market sentiment.

She said that the Fed rates had already been reflected in the exchange rates in the financial market since late 2014 and early 2015.

Hong said that there was no change in the dollar supply and demand in the recent past as the country still had a trade surplus while FDI and remittance inward flows to Viet Nam still continuously rose.

It is estimated that the country's total balance of payment this year would see a surplus thanks to an estimated FDI disbursement of US$14.5 billion and remittance of between $13 billion and $14 billion.

Hong also forecast that the FDI would not flow out of Viet Nam after the Fed's decision as foreign investors still trust Viet Nam thanks to the Government's efforts in macro-economic stability and economic restructuring, as well as the country's cheap labour costs.

Hong affirmed that the central bank would continuously keep a watch on the forex market and would take necessary measures to stabilise the market if necessary.

Besides the market sentiment, financial expert Vu Dinh Anh also attributed the rise in the forex market in the past to an increasing dollar demand by the year-end.

Anh said that the State Bank of Viet Nam has taken an initiative early as the Fed rise had also been taken into account in domestic scenarios for inter-bank exchange rates and trading bands of the rates, which had been adjusted over the last few months.

After devaluing the dong by 1 per cent early this year, the central bank in August continuously devalued the dong by another 1 per cent and widened the trading band for the reference rate to 3 per cent.

According to the central bank, the room for the dong exchange rate fluctuation has been adequate for flexible adaptation to any disadvantages that may happen in the global market, not only during the rest of 2015 but also during the first few months of 2016.

The central bank also affirmed that it would sell dollars to commercial banks if necessary to stabilise the forex market.

Annual interest rate on dollar deposits cut to 0%

Starting today, the maximum interest rate paid to individuals depositing US dollars in local banks will be zero per cent per year, the central bank announced.

Organisations, excluding credit institutions or branches of foreign banks, will also not receive interest for dollar accounts.

Prior to the change, the maximum interest rate for individuals was 0.25 per cent per annum. This notice was confirmed in Decision No.2589/QD-NHNN released last night. The central bank said the decision was made to continue implementing concerted measures to increase the value of the dong and curb the dollarisation of the economy. This decision takes effect today, December 18.