Exchange rates hit a ceiling as people awaited the Fed's decision.

Ms. Nguyen Thi Hong believes that the recent surge in the dollar exchange rate is primarily due to psychological factors and not related to supply and demand balance.

Deputy Governor Nguyen Thi Hong affirmed that the supply and demand for foreign currency in the market is not strained. Photo: Anh Tu.

The above statement was made by the Deputy Governor of the State Bank of Vietnam, Nguyen Thi Hong, at the "Review of 5 Years of Monetary Policy" seminar on December 17th. Prior to this, the USD/VND exchange rate at banks had reached its ceiling of 22,547 VND in the past few days. According to her explanation, this development was due to market sentiment awaiting the meeting of the US Federal Reserve (FED), with forecasts of a USD interest rate hike. In addition, the continuous depreciation of the Chinese Yuan (CNY) also contributed to this.

"The increase in the exchange rate is mainly due to psychological factors, because considering the supply and demand over the past few days, the buying and selling of foreign currency has remained normal, without any sudden spikes," she said.

According to Ms. Hong, despite the exchange rate reaching its ceiling, the demand for foreign currency from businesses and individuals is still being met promptly and fully by credit institutions. “This morning, when the FED announced a 0.25% interest rate increase, the market saw little trading. We continuously updated the market and saw that the exchange rate was showing signs of a continuous decline, and buying and selling transactions resumed. This demonstrates that exchange rate movements are influenced by psychological factors,” she reiterated.

The State Bank leader further informed that in October and November, Vietnam recorded a trade surplus while FDI continued to flow in and remittances from abroad remained high. This indicates that there have been no sudden changes in the supply and demand of foreign currency recently. “Clearly, the 0.25% interest rate hike by the FED was almost entirely reflected in the exchange rate increase from the end of 2014 and the beginning of 2015, as the market anticipated.”

According to VNE