Vietnam Dong, among most stable in Asia this year: experts

The currency has been kept stable, weakening about 1% against the US Dollar since the start of this year. An increase in remittances was behind this, said Can Van Luc, a member of the National Financial and Monetary Advisory Council.

Remittances from Vietnamese living abroad were worth US$13.4 billion in 2016, up 3% from the previous year, according to latest statistics by the World Bank. The remittances are forecast to grow 5-7% to exceed US$14 billion this year, taking Vietnam to the top 15 countries with the biggest remittances, he noted.

The rising remittances have helped the country ensure enough dollar supply to meet the domestic demand and allowed the State Bank of Vietnam (SBV) to boost forex reserves. “Such a high level of foreign reserves will allow us to step in to stabilize the money market when needed”, said SBV deputy governor Nguyen Thi Hong on the sidelines of a meeting last month.

The central bank has adopted a more market-based management mechanism with reference exchange rates set on a daily basis since January 2016 in its effort to maintain the Vietnam Dong’s value.

Luc added that surge in foreign direct investment (FDI) has also helped stablise the currency. The Ministry of Planning and Investment’s Foreign Investment Agency reported that Vietnam drew in US$28.24 billion in FDI in the first 10 months of this year, 12% higher than the country’s yearly target of US$25 billion. The FDI disbursement was estimated at US$14.2 billion during the period, up 11.8% year-on-year.

In addition, Vietnam has also witnessed a growth in foreign indirect investment over the past several years. Foreign investors have poured US$4.2 billion into the local stock market in the first three quarters of the year, a 3-fold increase from 2016, according to Director of the Business Development Institute Le Xuan Nghia.

Ho Chi Minh City led the way in both FDI attractions and remittances. The southern economic hub lured around US$5.03 billion in the first 10 months, doubling the year-on-year figure.

In 2016, overseas remittances to the city reached US$5 billion, accounting for 57-58% of the national total, a year-on-year rise of 11%. It aims a 10% growth to US$5.5 billion this year.

More pressure will be likely on the Vietnam Dong at the end of the year due to the US Federal Reserve’s forecast benchmark interest rate rise and higher demand for foreign exchange from importers ahead the Lunar New Year holiday.