Foreign reserves will be deployed to stabilize market: official

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The government will use its foreign currency reserves to inject more liquidity to the market in an attempt to meet the forex demand of the production sector, a senior government advisor said.

The central bank has been ordered to pump out enough foreign currencies to stabilize the market when it is strained, Le Duc Thuy, chairman of the National Financial Supervisory Commission, as saying Thursday.

Foreign exchange rates will be kept stable, he said.

According to the Commission, the State Bank of Vietnam sold dollars worth US$200 million in the market last month but this amount was not enough to make any clear impact.

"Current reserves are not too little to be used for market interference. The reserves are not a savings, their purpose is to stabilize the market," Thuy said.

Foreign reserves are scaled by weeks of imports. Vietnam's reserves at present can cover six to seven weeks of imports, the Vietnam Economic Times reported.

The dong weakened to as much as 20,940 per dollar on Thursday on the so-called black market, compared to 20,330 the same day last week.

The dong was devalued in August by 2 percent. The gap between the official and black-market rates widened to more than VND1,000 per dollar.

Thuy said the US dollar hike in Vietnam is only temporary, driven mainly by psychological factors that caused many people to rush to buy gold and dollars.

"A strong enough intervention can reverse the situation," he said.

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