De-Dollarisation Efforts Bearing Fruit
BMI View: The Vietnamese dong has remained stable within a narrow range of VND20,815/US$-VND21,238/US$ since the beginning of 2012, and we expect this trend to continue as we head into 2014. Furthermore, there is increasing evidence that the economy is evolving rapidly to become less reliant on the US dollar. We believe that Vietnam's improving macroeconomic fundamentals (benign inflation, robust current account dynamics) will continue to play a major role in supporting the SBV's de-dollarisation efforts over the years.
De-dollarisation efforts undertaken by the State Bank of Vietnam (SBV) over the years have yielded conclusive results in stabilising the exchange rate and reinstalling confidence in the domestic currency. Not only has the Vietnamese dong remained stable within a narrow range of VND20,815/US$-VND21,238/US$ since the beginning of 2012, but we also see increasing evidence that the economy is evolving rapidly to become less reliant on the US dollar. According to figures published by the SBV, banking system credit in Vietnamese dong grew by 11.0% year-on-year (y-o-y) in October, while credit in US dollars declined by 13.6%. Meanwhile, the ratio of foreign currency deposits over broad money supply has fallen sharply from around 30% in the 1990s to 16% by late-2011 and just 12% as of August 2013.
Seasonal Selling Pressure Dissipates
|Closing The Gap|
|Vietnam - Exchange Rate VND/US$, 12-Month VND/US$ NDF Outright & Spread|