The State Bank of Vietnam (SBV)’s timely intervention has been key to stabilize the VND in the context of global uncertainties.

The USD/VND exchange rate remained stable in October and even declined in early November, despite fluctuations of the international monetary market, according to Saigon Securities Incorporate (SSI). 

In comparison, the Chinese yuan (CNY) has devalued by 2.1% over the last two months, reaching CNY6.9758 for one USD as of the end of October and the highest since the beginning of 2017. Meanwhile, the People’s Bank of China has set the daily rate of the CNY to a decade-low of CNY6.9574. 

A sharp depreciation of the CNY has stoked a debate on whether or when it will slide to the psychologically important CNY7 a dollar. Meanwhile, the Vietnamese dong (VND) has devalued only 0.24% during the same period. 

In October, the SBV increased the reference exchange rate from VND22,714 to VND22,726, equivalent to the ceiling price of VND23,408. However, the USD/VND exchange rate quoted by commercial banks was stabilized at buying and selling prices of VND23,300 and VND23,390, respectively. In the free market,  the USD buying and selling prices stood at VND23,450 and VND23,470, slightly lower than the rate recorded by the end of September. 

According to SSI, the SBV’s timely intervention has been key to stabilize the VND in the context of global uncertainties. 

The interest rate for the dong in the inter-bank market increased by over 4.5% in all terms in October, of which, the overnight rate saw the fastest hike, reaching 4.533%, up 193 basis points compared to the end of September. 

The stabilization of the USD interest rate has further expanded the gap between the USD and VND exchange rates to 2.37%, in turn relieving pressure on the USD/VND exchange rate, stated SSI. 

Moreover, the SBV has injected a net value of VND92.06 trillion (US$3.96 billion) into the monetary market last month, ensuring the liquidity demand of the market. 

SSI also pointed to strong trade surplus of US$6.33 billion in the first ten months of 2018, which has been important to stabilize the exchange rate. As of October 20, disbursement of FDI projects jumped to US$15.1 billion, representing an increase of 6.3% year-on-year.

At a recent hearing held by the National Assembly, Deputy Prime Minister Vuong Dinh Hue 

informed that Vietnam's foreign exchange reserves are over US$60 billion, equivalent to a safe level of 13 weeks of imports. 

Hue also stressed that the Vietnamese government does not intend to devalue the dong to boost exports.

Hanoitimes