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USD surges to VND24,000, US$1.7 billion withdrawn from circulation

The State Bank of Vietnam (SBV) withdrew nearly VND41 trillion ($1.7 billion) through open market operations as the US dollar rose to over VND24,000 on September 26-30, 2022.

Meanwhile, the 7-day purchase operations were used regularly with the average daily volume of VND1 trillion and the interest rate increasing from 5.6 percent early last week to 5.9 percent late last week. As such, SBV pumped out VND4.7 trillion.

The net withdrawal last week was smaller than the week before (VND55.8 trillion). However, the term for bonds was double, 14 days, instead of seven days as applied in the week before.

The interest rate last week was higher than the week before for the money pumped into the market, and lower for the money withdrawn from circulation. 

Analysts commented that the net withdrawal of money shows that liquidity in the banking system has improved.

In the interbank market, the overnight interest rate fell after many weeks of increases, from the peak of 5.16 percent per annum on September 27 to 4.98 percent on September 30.

SBV has continued to withdraw money from circulation as the VND/USD exchange rate in the free market keeps increasing. As of the end of September, the USD/VND surged to over VND24,000.

Commercial banks have raised quoted dollar prices by hundreds of dong per dollar. On September 30, the selling price was quoted at VND24,010 per dollar, or VND120 per dollar higher than the previous trading session. 

The official exchange rate was also raised to VND23,400 per dollar. With the +/-3 percent, the ceiling dollar price climbed to VND24,102 per dollar.

SBV withdrew money from circulation amid high risks of inflation and the high exchange rate, following the US Federal Reserve’s (FED) move of raising interest rates, which has caused the USD price to soar to a 2-decade high. 

Many hard currencies around the world have seen prices fall to 10, 20 or 40-year lows against the greenback.

From the beginning of the year to September 23, the VND lost 4 percent of value against the USD. The VND is one of the currencies with the least depreciation compared with other currencies in the world. 

The Japanese yen has lost 25 percent of its value, the Thai baht 12 percent and the  British pound 20 percent.

Vietnam’s forex reserve, according to Maybank, amounts to $100 billion.

Ngoc Cuong

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