According to SSI Research, the escalating trade war with China has upset the management policy followed by the US FED. The agency has stopped the succession of interest rate increases and has for the first time in the last decade lowered the interest rate by 25 percentage points. It is highly possible that further interest rate slashing will be made in some days.

Meanwhile, PBOC, the Chinese central bank, has also cut the required compulsory reserves (four times in 2018 and three times so far this year), changed the mechanism to improve the efficiency of the interest rate management, and devalued the yuan to support the economy.

At the same time, uncertainties exist in the largest economies across continents such as Germany, the UK, Japan, South Korea and Argentina, which has reduced the prospects for global economic growth.

According to SSI Research, unlike the divergence in the interest rate adjustments in 2018, many central banks decided to cut their interest rates in 2019.

According to SSI Research, unlike the divergence in the interest rate adjustments in 2018, many central banks decided to cut their interest rates in 2019.

Ninety three interest rate adjustments of lowering interest rates have been made so far this year, while there have been only nine adjustments of raising interest rates.

Though cutting interest rate has become a growing trend in the world, the State Bank of Vietnam (SBV) is still cautiously managing the monetary policy which aims at stabilizing the macro economy, and it has succeeded so far.

While many currencies fluctuate heavily (KWR and SEK have lost 9 percent of value, while RUB and THB have appreciated by 5-6 percent against the dollar), Vietnam dong remains one of a few currencies which have a stable value.

The local currency once fluctuated considerably in the time from late April to the end of May. However, the dollar price quoted by commercial banks only increased by 0.84 percent compared with late 2018 to VND23,360 per dollar at maximum, and then cooled down.

Even when the pressure on the exchange rate increased as the dollar/yuan exchange rate exceeded the 7.0 yuan per dollar threshold, and the yuan depreciated (by 4 percent in August 2019 alone), the Vietnam dong was flat. At present, the dollar price is 0.06 percent lower than the rate in late 2018.

The SSI Research team can see favorable conditions which will help stabilize the exchange rate in the time to come.

First, after two campaigns of purchasing foreign currencies, Vietnam now has huge forex reserves of $70 billion.

Second, the trade balance and foreign investment are going well. Vietnam had a trade surplus of $3.43 billion in August and $5.1 billion in the first eight months of the year.

Kim Chi 

Forex reserves reach highest level to date

The State Bank of Vietnam (SBV) obtained a large amount of foreign currencies in the first half of 2019, pushing foreign exchange reserves recorded in the period to the highest level to date.