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The State Bank of Vietnam has resumed buying foreign currencies in part due to the weaker pound and euro in the aftermath of the United Kingdom’s decision to leave the European Union, or Brexit.
Britain's unprecedented decision on June 24 sent financial markets around the world into a downward spiral. Economist feared a domino effect as a plunging pound would force Vietnamese market regulators to take the devaluation of the dong into account.
The securities arm of top partly private commercial bank Vietcombank said in a report that the central bank might not have the resources left to keep the dong from succumbing to pressure from Brexit as Vietnam typically has low foreign exchange reserves.
However, with the post-Brexit impact fading, the market has quickly returned to stability, and the central bank has resumed its efforts to bolster foreign reserves.
HSBC cited the International Monetary Fund (IMF) as saying that Vietnam’s foreign exchange reserves sharply declined to some $27.9 billion at the end of last year because the central bank tried to curb dollar hoarding and stabilize the foreign exchange market.
However Vietnam managed to enlarge its foreign reserves to around $33.6 billion in the first quarter, HSBC said in its report.
HSBC also estimated the central bank’s stockpile of foreign currency had increased by $8 billion over the first five months of this year.
The bank said the amount of foreign currency that Vietnam held as of the end of June was equivalent to 12 weeks of imports.
Meanwhile BIDV, one of the largest lenders in the country, said in a report that the central bank had bought an additional $7 billion during the first five months of this year.
