Vietnam central bank ready to cool USD surge: Deputy Governor

The State Bank of Vietnam (SBV) stands ready to make needed interventions to curb the worrisome strengthening of the U.S. dollar against the local currency, a senior official has said.

“We are ready to intervene in the foreign exchange rate if it continues to exert negative influence on the Vietnamese economy, even today right away,” the SBV’s Deputy Governor Dao Minh Tu said at a press meet Friday.

If the USD/VND rate moves in line with global developments, the central bank will manage it via its mid-point forex rate set daily, observing local commercial banks’ trade as well as the economy’s forex positions, he added.

Tu stressed that the bank, with its current hard currency reserves, was capable of handling the forex rate and ensuring that it remains stable .

He noted that the Vietnamese dong has devalued 4.9% against the greenback since the start of this year, exceeding a less than 3% depreciation for the whole of 2023.

However, he also said that the devaluation was still smaller than several regional peers, including the Taiwan dollar, down 5.96%; the Thai baht, 7.13%; the Japanese yen, 9.69%; and the Korean won, 7.71%.

“We hold that management of the forex rate should be flexible, letting it move up and down properly, mitigating its impact on external trade,” Tu said.

He mentioned several factors behind the strong rally of the USD versus the VND. First, a postponement by the Fed in cutting interest rates due to lingering inflation and strong jobs data and geopolitical tensions have caused the greenback to gain 5% against key currencies in the year to date.

Other causes included VND-denominated interest rates staying lower than USD-denominated rates; rising demand for forex to cover import bills; and market expectations for a continued stronger dollar, Tu added.

Elaborating on the SBV’s forex management, Pham Chi Quang, the bank’s head of monetary policy department, said the central bank has taken action to ease upward pressure on the USD/VND rate.

For example, in March, the SBV withdrew excess cash in circulation by issuing T-bills. On Friday, it announced on its website that it will sell USD to banks that have negative forex positions.

On Friday, the SBV raised its mid-point USD/VND rate by VND29 from Wednesday (markets closed on Thursday for the Hung Kings’ commemoration holiday) to VND24,260, the highest ever.

With a trading band of ±5%, commercial banks can trade the USD in a range of VND23,047-25,473.

Vietcombank is offering the greenback at VND25,133-25,473 a dollar for buying and selling, up from VND25,100-25,440 on Wednesday, respectively. This is the third straight day that the bank has quoted the USD at the upper limit.

Gold shops quoted the U.S. at VND25,680-25,760 for bids and asks, up VND160-90 from Wednesday.