Foreign exchange market to be stable in 2018

According to the Bank for Investment and Development of Vietnam’s capital and monetary researching division, the country’s overall balance of payment can maintain a healthy surplus of some US$8-10 billion this year, which is important for the stability of the foreign exchange market.

The good balance of payment is thanks to a trade surplus forecast for this year, while the remittance inflow would inch up by 5 per cent to $10.5 billion.

Besides, foreign direct and indirect investment capital inflows are also anticipated to maintain their high growth, owing to the improvement in the business environment of the country, the division said, forecasting that the disbursement of the capital source could reach $21-23 billion this year.

However, the division also forecast that the liquidity of the US dollar in the inter-bank market in 2018 will not be as abundant as last year, causing the interest rate for one-week loans in the market to rise by some 0.5-0.6 percentage points, against the end of 2017, to 2-2.1 per cent.

According to the division, there will be some factors that will put pressure on the rate in the inter-bank market this year.

Firstly, the gap between lending and capital mobilisation of the greenback will continuously be maintained this year, as lending in the dollars is forecast to continuously rise by 8 per cent to 10 per cent, given the stable exchange rate and the central bank’s continuous foreign currency lending policy, while the dollar capital mobilisation is estimated to rise by only 3 per cent to 5 per cent, in the wake of the central bank’s zero per cent dollar deposit interest rate policy.

Secondly, the interest rate on the dollar in the global market is expected to increase by 0.6-0.7 percentage points per year in 2018, as the US Federal Reserve (Fed) is expected to make another rate hike this year if its economy continues on an upward trend.

A leader of a commercial bank, who declined to be named, admitted that it was necessary to be cautious with dollar liquidity, as lending in the currency was rising significantly, while the increasing rate of capital mobilisation was much lower.

The division also reported that the interest rate on dollar loans in the inter-bank market by the end of last year rose some 0.4 per cent to 0.5 per cent per year, against the end of 2016.

Besides this, the Libor interest rate in the international market last year also rose some 0.6 per cent to 0.7 per cent yearly for one-week to three-week loans after the Fed increased the rate thrice from 0.5-0.75 per cent to 1.25-1.5 per cent per year.

The State Bank of Vietnam has so far also required credit institutions and foreign bank branches to strictly control their loans in dollars, in a move to balance lending and mobilisation.