SBV curbs foreign currency hoarding, dollarisation

SBV Governor Nguyen Thi Hong speaks at the question-and-answer event of the 15th National Assembly’s 8th session on November 11. (Photo: VNA)

Hanoi – The State Bank of Vietnam (SBV) has applied a 0% interest rate on foreign currency deposits to address foreign exchange and exchange rate volatility, Governor Nguyen Thi Hong explained during a question-and-answer event at the 15th National Assembly’s 8th session.

Hong noted that in the past, surplus foreign currency was often hoarded rather than sold off into the economy. Since 2016, the SBV has implemented coordinated measures aimed at controlling inflation to stabilise the Vietnamese dong (VND), one of which is the 0% interest rate on foreign currency deposits.

The SBV also issued regulations to limit foreign currency purchases by companies without actual need and shifted to managing the exchange rate based on a central reference rate that fluctuates daily. This approach has reduced speculative hoarding of foreign currency and curbed dollarisation in the economy.

She said a rise in foreign currency deposit interest may trigger a switch from Vietnam dong to US dollar, bringing great risks in the market.

Addressing foreign borrowing, the governor explained that as a developing economy with capital needs, Vietnam relies on foreign resources through direct and indirect investments and loans, while maintaining a macroeconomic balance.

Hong emphasised that the SBV is committed to controlling inflation and maintaining the dong’s stability in line with statutory objectives. Managing gold and foreign exchange rates suitable to market developments, the central bank currently allows a 5% fluctuation band for the exchange rate. "We are closely monitoring developments in the market, and the SBV will timely convene in case of great fluctuations in the exchange rate," she said.

Regarding unlicensed forex trading platforms, the official clarified that only credit institutions are licensed to trade foreign currencies according to current regulations. The SBV has yet to license any trading platforms, she added. Unauthorised trading can expose citizens to scams, and authorities must intensify control to address the issue./.