SBV to hold forex rate steady until early 2016
The State Bank of Viet Nam has said it would hold the exchange rate steady till the end of the year and also in the early months of 2016.
The bank's statement came after the US dollar-dong exchange rate touched the cap of VND22,547 set by the central bank on Monday.
Yesterday, commercial banks continued to list the ceiling rate despite the central bank's statement.
Vietcombank listed the dollar buying and selling rates at VND22,500 and VND22,547, respectively, while the rates of BIDV and Vietinbank were VND22,510 and VND22,547, respectively, the same as yesterday.
Sacombank raised its buying rate by 20 dong to touch VND22,480, while maintaining the selling rate at VND22,547.
SBV Deputy Governor Nguyen Thi Hong said the change in the forex market in the last few days was due to psychological factors and speculative rumours.
Hong said with the goal of stabilising the market, the central bank had prepared a set of necessary measures and tools and was willing to intervene by selling foreign currencies to stabilise the exchange rate and the market within the set band.
In August, the central bank increased the exchange rate by one per cent and widened the trading band to three per cent.
Hong said the above adjustment was very strong as the central bank was preparing for volatility, including further devaluation of the Chinese yuan and a possible US Federal Reserve rate increase in the next few months.
"With the adjustment, the SBV has given the Vietnamese dong ground large enough to be flexible against adverse developments on both the domestic and international markets, not only in the final months of the year but also into the early months of 2016, bringing stability to the currency market and ensuring the competitiveness of Vietnamese goods," Hong said.
Director of Business Development Institute Le Xuan Nghia said the volatility of the forex market during the past few days was due to the market expectation that the central bank would continuously devalue the dong.
However, Nghia said the expectation was baseless, adding that there would be no further devaluation till the end of the first quarter next year.
Nghia said the central bank scrutinised the situation before deciding to make two separate adjustments, one following the other in just a week, instead of a single adjustment.
The central bank on August 12 widened the dong trading band from one per cent to two per cent as an initial proactive response to the largest depreciation of the Chinese yuan in the past 20 years, he said.
However, after the strong devaluation of the Chinese yuan, the domestic market sentiment was still concerned about the possible consequences of an interest rate rise by the United States Federal Reserve. To continue leading the market proactively and pre-empt any adverse impacts of the Fed Reserve's rate rise in the future, the SBV decided to increase the American dollar-dong exchange rate by one per cent and widen the trading band from two per cent to three per cent, Nghia said.