Central bank to boost foreign currency sales

The State Bank of Vietnam planned to increase the frequency of foreign currency sales in response to heightened pressure in the foreign exchange market induced by the U.S. Federal Reserve's interest rate hike.

With a foreign exchange reserve of over $100 billion, the central bank will maintain the sale of foreign currency to stabilize the market, Pham Chi Quang, deputy head of the bank’s monetary policy department, said Monday.

"The State Bank will expand sales of foreign currency to enhance market supply."

The decision came after the Fed raised interest rates by 0.75% on May 16, the largest hike in 28 years and the third time this year.

The hikes boosted the U.S. Dollar Index, which measures the value of the U.S. dollar against a basket of foreign currencies, up 10% from the beginning of the year.

These developments have a negative impact on the balance of foreign currency supply and demand, as well as local market sentiment, placing pressure on the exchange rate and foreign currency market stability.

However, the U.S. dollar/Vietnamese dong exchange rate has increased by only 2% from the end of 2021. Despite the international market's high volatility, the domestic foreign currency market has remained stable, with good liquidity, Quang noted.

In addition, the economy's foreign currency demand is met on time, particularly for the import of essential manufaturing and business comodities amid rising energy and basic costs, he added.

The State Bank will continue to regulate the currency exchange rate with enough wiggle room to absorb external shocks, contributing to market and macroeconomic stability, as well as inflation control.