State Bank may sell USD to stabilize the market

The State Bank representative affirmed that it always proactively provides appropriate solutions and management tools to stabilize the foreign exchange market.

In recent days, the foreign exchange market has experienced strong fluctuations. The central exchange rate has been continuously adjusted upward by the State Bank of Vietnam (SBV). Along with that, the USD/VND exchange rate at commercial banks has also been pushed up to a fairly high level. In the free market, the USD exchange rate has increased the most since the beginning of the year. How will this impact the financial market and the Vietnamese economy?

According to economic experts, the USD has increased in value by about 3% compared to 2 weeks ago. The reason for the increase in the USD is that the world financial market has stabilized after billionaire Donald Trump was elected President of the United States. In addition, next December, the US Federal Reserve (FED) may increase interest rates by 0.25%, which will increase the value of the USD.

The central exchange rate has been continuously adjusted upward by the State Bank in recent days. Illustrative photo

Meanwhile, the last months of the year are the time when many Vietnamese enterprises need foreign currency to pay for imported goods, and it is also the time when the Government and enterprises pay foreign debts, so there is a huge demand for foreign currency.

Dr. Nguyen Tri Hieu, a financial and banking expert, said that there is currently a lot of pressure on exchange rates.

“There are two scenarios: either keep the dong stable as it is now without much adjustment or adjust to increase the exchange rate. If it is kept stable, it is good for the economy, creating confidence among people and businesses in the dong. But on the other hand, if the dong is kept unchanged with the USD, while other currencies such as the Chinese Yuan depreciate against the USD, Vietnamese goods will become expensive and lose competitiveness. To support exports, adjusting the exchange rate is necessary, but to what extent is a problem that needs to be calculated,” Dr. Nguyen Tri Hieu analyzed.

However, according to Dr. Can Van Luc, member of the National Financial and Monetary Policy Advisory Council, the developments in the foreign exchange market in recent days have not reached a worrying level. The depreciation of the Vietnamese Dong is not too large, only about 1.5%.

In general, the foreign currency supply and demand relationship is stable, Vietnam is still having a trade surplus... However, the State Bank still has to closely follow the market, especially the central banks in the region that compete with Vietnam in exports such as China, Indonesia, Thailand...

“In fact, Vietnam is adjusting the exchange rate every day. The State Bank needs to continue to closely monitor the market and have policies to reduce the “heat” of the USD as in the past, such as continuing to issue State Bank bills, and needing communication strategies to reduce psychology… Be ready to respond promptly, and come up with a unified scenario when the USD increases too much and countries in the region devalue their currencies too much,” Dr. Can Van Luc pointed out.

On the afternoon of November 24, Ms. Nguyen Thi Hong, Deputy Governor of the State Bank of Vietnam, said that the exchange rate movements in recent times were mainly due to psychological factors, and could reverse in the coming time. Since the beginning of 2016, the State Bank of Vietnam has switched to a method of managing exchange rates that allows flexible daily fluctuations in accordance with world market developments.

“The legitimate foreign currency needs of individuals and organizations are met promptly and fully by credit institutions. The State Bank closely monitors domestic and international macroeconomic and monetary developments. From there, it proactively proposes appropriate solutions and management tools to stabilize the market. The State Bank is also ready to sell foreign currency to stabilize the market,” Ms. Hong affirmed.

The Deputy Governor of the State Bank of Vietnam also affirmed that from now until the end of the year, the foreign currency supply will not be tense. Because it continues to receive support from export revenue, remittances at the end of the year and disbursement of FDI capital flows. Meanwhile, the demand for foreign currency has not been under great pressure, especially the demand for foreign currency purchased before maturity, which often occurs when there are fluctuations in the exchange rate, has been limited.

The State Bank of Vietnam also continues to allow credit institutions to lend foreign currency to individuals and organizations until the end of 2017. This is also one of the solutions to reduce foreign currency tensions in the coming time.

According to VOV