VietNamNet Bridge - With Chinese renminbi joining the International Monetary Fund’s (IMF) reserve currency basket, the dong/dollar exchange rate will be affected, according to financial experts. But it will have little effect on Vietnam.

 


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IMF has agreed to add the Chinese yuan to its reserve currency basket

IMF has agreed to add the Chinese yuan to its reserve currency basket, effective October 1, 2016. The international press commented that it marked another step in China's global emergence.

Meanwhile, the Bank for Development and Investment of Vietnam’s (BIDV) Research Center believes that it has ‘more symbolic meaning than value’. This shows the role of the Chinese economy in the world and puts the renminbi on the list with the US dollar, Japanese yen and European euro.

Meanwhile, the renminbi reserves in cash and assets, expected to reach 3 percent of the basket, are ‘not large’, according to the research center. 

Nguyen Tri Hieu, a renowned banking expert, commented that once the renminbi becomes convertible, it will help boost China’s trade because businesses will not have to use the dollar as currency in payment. Vietnam, which imports Chinese goods in large quantities, will also receive benefits in doing trade with China because the Chinese renminbi value fluctuations will be predictable for Vietnamese businesses.

Hieu believes the Vietnamese foreign exchange market will bear influences once renminbi is included in SDR (special drawing rights) basket, because China may float its currency. 

“If the Chinese renminbi depreciates, this will have an impact on the dong/dollar exchange rate,” he warned.

According to BIDV, the domestic foreign exchange market shows close links with the international monetary market. 

Once the renminbi becomes convertible, it will help boost China’s trade because businesses will not have to use the dollar as currency in payment.

(Nguyen Tri Hieu, banking expert)
The dong has depreciated by VND170-180 per dollar to VND22,470-22,480 per dollar since late October, despite the good news that the trade balance has seen a surplus of $500 million.

The continued dollar price increase is attributed to an expected dollar appreciation in the world market, empowered by the prediction that the US FED would raise the prime interest rate in December.

The domestic foreign exchange market is believed to be hot in the immediate time with the prediction about a dollar appreciation and high demand for dollars in the year-end season as Vietnamese businesses need dollars to make payment for imports, while foreign-invested enterprises need dollars to transfer their profits abroad.

BIDV has predicted that the dong may depreciate by another 3-4 percent against the dollar, while the dollar price may exceed VND23,000 per dollar threshold.

Meanwhile, HSBC Vietnam’s CEO Pham Hong Hai thinks the dong/dollar exchange rate will be stable in the last month of the year, if there are not major changes in the world market and the State Bank continues selling foreign currencies.

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