USD/VND exchange rate plummets on free market

The selling price of the U.S. dollar on Vietnam's free market fell to VND24,938 on Thursday morning, down VND62 from the previous day, approaching the rates at commercial banks.

In the early trading session Thursday, the U.S. Dollar Index (DXY), which monitors the fluctuation of the greenback versus major currencies of EUR, JPY, GBP, CAD, SEK, and CHF, went down 0.14% to 106.26.

The State Bank of Vietnam maintained the central exchange rate at VND23,677 per U.S. dollar on Thursday, resulting in the exchange rate ceiling at commercial banks at VND24,860.

Meanwhile, the buying and selling rates of the greenback at commercial banks were at the same levels of previous days, at between VND24,580 and VND24,861.

At state-controlled Vietcombank, a "Big 4" bank in the country, Thursday’s buying and selling rates were VND24,580 and VND24,860 per U.S. dollar respectively, the same as Tuesday and Wednesday's tallies.

VietinBank, another “Big 4”, had corresponding figures of VND24,657, up from VND24,565 one day ago; and VND24,861, unchanged from a day earlier.

BIDV, also a “Big 4” bank, had buying and selling rates of VND24,620 and VND24,860, the same as those on Wednesday.

The U.S. Federal Reserve's (Fed) recent interest rate hike put pressure on the exchange rate, leading to the VND depreciating 9% from the beginning of this year. However, the expectation that the Fed will be less "hawkish" per the easing inflation in the U.S. may cause the USD to depreciate.

The State Bank of Vietnam has sold about $22 billion from its foreign exchange reserves so far this year, bringing it down to about $87 billion. Brokerage firm ACB Securities (ACBS) says the selling equals 21% of the reserves in 2021; and that Vietnam’s forex reserves are now equivalent to 12 weeks of imports, still "within the safety threshold".

Economist Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Counci, suggested the central bank allow the VND to depreciate more, up to 10% by the end of the first quarter next year, in a move to reduce the loan interest rates and support firms by increasing the total money supply (M2).