I said I would not buy USD, because if everyone rushes to buy USD at this moment, this would lead to chaos in the market, which once occurred many years ago, when the dollar ‘flooded’ the economy. I didn’t know what my friends would do after my answer.
The dollar price has increased, but the VND is one of the most stable currencies in the region. In a report to National Assembly recently, the central bank said in the first nine months of the year, the Vietnamese dong lost 4.8 percent of its value against the dollar, depreciation which was much lower than other regional countries.
This is because the central bank has been taking initiative in regulating the dong/dollar exchange rate, both creating space for the exchange rate to perform more flexibly in accordance with the dollar price in the world market, and selling a large number of foreign currencies to improve market liquidity.
The stability of the Vietnamese dong is important. The USA's decision on raising interest rates to a record high has helped attract a large amount of capital to the economy, leading to the sharp appreciation of the dollar in the world market. As a result, many currencies have depreciated against the greenback.
As of September 30, TWD had lost 4.58 percent of value against the dollar compared with the end of 2021, the THB 14.35 percent, JPY 25.72 percent, KRW 20.34 percent, PHP 15.13 percent, INR 9.65 percent, MYR 11.4 percent, CNY 12 percent, EUR 13.8 percent, and GBP 18.03 percent.
The VND interest rate has also increased as a result of the exchange rate pressure. However, that has little significance, because commercial banks have no more credit quota to lend.
What will the situation be like? Let me quote the recommendations in the World Bank October report: as CPI and core CPI are coming closer to the 4 percent threshold, equal to the policy interest rates set by appropriate agencies, the monetary authority needs to be ready to consider tightening monetary policy more to be able to curb inflation.
According to this financial institution, when debt repayment extension finishes and financial mobilization conditions are tightened, the financial sector will face higher risks. This requires guidance from the central bank to prevent the risks from getting realized, which can affect the economy in fact.
I think in such conditions, the fiscal policy needs to ‘share fire’ with the monetary policy.