VietNamNet Bridge – The State Bank of Vietnam (SBV) will not adjust the foreign exchange rate at present and will take bold measures to stabilise the forex market, a senior SBV official has affirmed.

The central bank will tightly oversee the forex market to make it steadier.

SBV deputy governor Le Minh Hung made the affirmation at a press briefing in Hanoi on July 10 amidst recent sharp fluctuations in the foreign currency market.

The market has been heating up for more than a week after the central bank decided to raise the exchange rate of the US dollar against the domestic currency (Vietnam Dong) by 1% on June 28, standing at VND21,036/US$.

Immediately commercial banks raised the rate to a maximum of VND21,220/US$ for the buying price and VND21,246/US$ for the selling price at some times.

The rate on the black market was even hiked to a VND22,000/US$ mark and was then lowered to around VND21,800 on July 9.   

Hung confirmed that there have been no major changes in foreign trade balances over the past few months.

Vietnam suffered a trade deficit of US$1.4 billion in the first half of this year, accounting for 2.3% of the country’s total export value. Total disbursed foreign direct investment amounted to US$5.7 billion.

Other foreign trade revenues such as overseas remittances and foreign indirect investment remained high, and the overall balance of payment surplus for 2013 is estimated at US$5 billion.

Weighing up recent forex market fluctuations, the central bank attributed the sharp rise in the foreign exchange rate to psychological factors rather than the market law of supply and demand.

There is no imbalance in supply and demand of the US dollar, except for several banks’ decisions to increase the purchase of the dollar thank to improved liquidity of the Vietnam Dong, Hung said.

The bank’s June 28 decision is to more accurately reflect the market law of supply and demand of foreign currencies, creating a steady forex market, and the new rate is appropriate, he explained.

The SBV representative did not rule out the possibility that opportunists on the black market capitalised on the central bank’s decision to corner the market.

He said the central bank will work closely with relevant agencies to increase inspections at credit organisations and nip any illegal transactions in a bud.

He also reiterated the bank’s commitment to raise the VND/US$ exchange rate by less than 2-3% for the whole of 2013.

It’s worth mentioning that Vietnam gives priority to containing inflation this year and any forex rate adjustments should be taken into account as they might affect national inflation control efforts.

Over the past two years, the State Bank of Vietnam has introduced a flexible monetary policy, helping stabilise the forex rate and increase national foreign currency reserves.      

Source: VOV