Exchange rate adjustments
The State Bank of Viet Nam (SBV) raised the trading band of VND/USD from +/- 1% to +/-2%, on August 12 in response to the yuan devaluation of 1.9% on August 11.
The adjustments were considered as appropriate with real conditions and received positive feedbacks from the public, said SBV Deputy Governor Nguyen Thi Hong at a press briefing to explain the SBV’s decision to raise the interbank USD/VND exchange rate and adjust the trading band two times within one week.
Nevertheless, the market still showed signs of concern over the possibility that the U.S. Federal Reserve System (FED) will raise interest rate in the upcoming time.
In order to actively guide the market and get prepared for possible negative impacts, the SBV on August 19 decided to raise the interbank exchange rate by 1% from VND/USD 21,673 to VND/USD 21,890 and expand the trading band by another one percent to +/- 3%.
After two adjustments, the current exchange rate band provides enough room to cope with changes on the domestic and international markets, not only for this year but also for the early months of 2016, said the SBV Deputy Governor.
Positive and sound steps
Representatives of the International Monetary Fund and the World Bank in Viet Nam regarded these moves as positive and sound steps.
Chief Representative of the IMF in Viet Nam Jonathan Dunn said that “the expansion of exchange rate amplitude serves to strengthen policy buffers in response to external socks and help Viet Nam to have independent monetary policies. As a result, the Government would achieve larger goals of stable inflation rates and macro-economy.
Mr. Dunn also stated that the more flexible exchange rate in two ways also play an important role in facilitating basic changes in the Vietnamese economy such as accession to new free trade agreements and other restructuring reforms.
Meanwhile, Ms. Victoria Kwakwa, the Country Director of World Bank in Viet Nam regarded the recent exchange rate adjustments as sound and positive steps in the wake of the devaluation of the yuan by China and an anticipated interest-rate hike by the U.S. Federal Reserve. Hence, the SBV was well-prepared for future developments in more flexible manner.
The WB Country Director also noted that Viet Nam should consolidate ability to resist both positive and negative “socks” to maintain macro-economic stability and build policy buffers as it is deeply integrating into the global financial and monetary system.
Ms. Victoria Kwakwa also suggested the SBV keep a close watch on and assess impacts of policy adjustments on macro-economic stability and public confidence for timely response.
The recent move would facilitate Viet Nam’s exports in the short term, said Standard Chartered Viet Nam's CEO Nirukt Sapru.
According to Ms. Natalia Olegovna Ansell, Director of Citibank Viet Nam, the country’s export-driven economy has gained positive growth. All other Asian economies like Taiwan, Thailand, Indonesia, China, and Malaysia applied currency devaluation by 3% last month. The SBV performed smoothly and kept a close watch on the developments to ensure economic growth.
She also revealed that the liquidity bounced back in August 20 and the market confidence was stabilized. The supply and demand of foreign currency was also balanced./.
Source: chinhphu.vn