![]() The pressure on the exchange rate still exists, and there is not much space for policy changes from now to the year-end. SBV’s management policies are relatively cautious. SSI Research estimated that as of August, SBV had made a net withdrawal of VND115 trillion through OMO and VND70 trillion through foreign currency sale channels.Ī SBV official told a forum several days ago that it will not let credit grow more than 14 percent this year and will make efforts to stabilize the exchange rate. ![]() This, plus the withdrawal of VND through OMO, helped ease pressure on the exchange rate and support market supply. The SBV over the last 20 years has continued to sell dollars, leading to a 12 percent decrease in reserves.Īccording to SSI Research, the State Bank of Vietnam (SBV) sold a large amount of USD from the forex reserves last August. According to Maybank, as of the end of 2021, VIetnam’s total forex reserves had reached $107 billion. The head of the US FED, Jerome Powell, at a conference on August 25-26, stated that the US view is that the central bank will continue to tighten monetary policy to fight inflation.Īnalysts say the VND is under pressure to depreciate. The market expects the FED to reduce interest rates by autumn 2023.ĬNBC cited Loretta Mester, President of the Federal Reserve Bank in Cleveland, as saying that in the battle against inflation, the interest rate will increase considerably before the FED reduces it. So far this year, the US FED has raised the interest rate four times by 225 percentage points. DXY (US Dollar Index), the factor that measures the dollar's fluctuations in comparison with the basket of six key currencies, has climbed to over 110 points. It is highly possible that the US FED will raise the interest rate by another 75 percentage point to 3-3.25 percent to control inflation. The VND has decreased while the USD has stayed at a 20-year high. On the black market, the rate has increased by VND80 (buy) and VND130 (sell), to VND24,060-VND24,160/$1 (buy and sell). The Bank for Investment and Development of Vietnam (BIDV) has raised the rate by VND190 over the last three weeks. Vietcombank has raised the rate to VND23,810/$1 (buy) and VND23,530 (sell), up VND200 compared with the lowest figure in early September. The official exchange rate has increased by VND156 or 0.7 percent so far this year.Īt commercial banks, the exchange rate has also been adjusted. The selling price at the SBV Exchange climbed to VND23,700/$1. With the currently applied +/-3 band, the ceiling exchange rate hit the VND24,000/$1 threshold. On September 20, the USD increased by VND6 to VND23,301/$1 and was unchanged on September 21. The official exchange rate has seen the fifth consecutive increase. For 2016, the panel projects the dong to trade at 22,108 per USD.The VND/USD official exchange rate has been increasing in recent sessions, ahead of the US Federal Reserve’s (FED) meeting, and the dollar continued at a two-decade high. With these changes, the SBV hopes to safeguard the dong against fluctuation in domestic and international markets, and maintain the competitiveness of Vietnam’s exporters.įocusEconomics Consensus Forecast panellists expect the dong to trade at 21,812 per USD at the end of this year. The list of adjustments made by the SBV in August is indicative of a host of pressures affecting Asian forex markets. and uncertainty in Europe over the Greek debt fallout, as well as other external factors, required a more flexible trading band. The SBV had defended that decision stating that a stronger recovery in the U.S. The decision to widen the dong’s trading band follows a similar action on 12 August to expand the band from +/-1.0% to +/-2.0% around the previous midpoint of 21,673 VND/USD. A weaker dong also means the SBV is able to use less resources in order to maintain the exchange rate as strengthened expectations of the Fed’s interest rate hike later this year put downward pressure on the currency. ![]() The move to devalue the currency comes in response to the depreciation of the Chinese yuan earlier this month, and will help support Vietnam’s external position as currencies in the region lose ground against the greenback. The move follows two prior devaluations of the dong this year of 1.0 percentage points each in January and May. The Bank also decided to widen the exchange rate trading band from +/-2.0% to +/-3.0%, spreading the floor and ceiling exchange rates to 21,233 and 22,547 VND per USD, respectively. On 19 August, the State Bank of Vietnam (SBV) announced an adjustment to the average inter-bank VND/USD exchange rate, raising the rate from 21,673 VND/USD to 21,890 VND/USD, the equivalent of a 1.0% increase. Vietnam - Exchange Rate Central Bank devalues dong, widens trading band
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