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Dollar falls following SBV's announcement

Update: May, 28/2015 - 09:09
The central bank confirms no more lift on the VND/USD rate in 2015.— Photo
HA NOI (VNS)  — Dollar rates in all local commercial banks fell yesterday after the State Bank of Viet Nam (SBV) said it will not lift the rate this year.

The greenback rates have been soaring in local markets since early this year. As an intervention, the central bank had increased the inter-bank exchange rate to VND21,673 per US dollar on May 7. With an effective 1 per cent margin, the ceiling price is VND21,890 per dollar.

Earlier, the SBV announced that it would lift the dollar/dong rate to maximum 2 per cent in 2015, and the lift in May has raised the dollar/dong rate to the highest level it has so far committed to.

However, in the last three days, the greenback rates still grew fast and approached the ceiling prices in commercial banks and flea markets. On May 25, the rates were only VND20 lower than the ceiling price.

Besides the fact that US dollar prices rallied in the international market, Vu Viet Ngoan, Chairman of National Financial Supervisory Commission, told the Vietnam Economic Times that the high trade deficit during the first five months had been an important reason for the surge.

Ngoan said lower prices, especially of food, in the international market, had created more difficulties for local agricultural export products. At the same time, an increase in imports had put more pressure on exchange rates.

However, Ngoan said a larger reason for the hike was the speculating tendency of domestic investors, who thought that the SBV will step up US dollar rates again and again.

On Ngoan's side, Le Quang Trung, Deputy CEO and Head of the Treasury of the Viet Nam International Bank noted that the demand and supply of the foreign currency were stable in most of the commercial banks, adding that the hike was caused by psychology factors alone.

To avoid any negative impact on the rate, Ngoan said there should be fully and well analysed information about the temporary and long-term progress of markets so that relevant managing agencies can make good adjustments.

Yesterday, SBV deputy governor Nguyen Thi Hong said on the central bank's official website, that the SBV was willing to sell foreign currencies as a market intervention mechanism.

While banking and finance experts forecast a larger room for the rate, Hong confirmed its commitment to not allow the rate to exceed two per cent in 2015.

Hong stressed that any more adjustment of the rate will increase the foreign debt obligations of the government and affect the control on public debt, which is close to 60 per cent of the GDP. She said that although the current level of inflation has been under control, they cannot be subjective because oil prices can rebound.

The deputy governor said the SBV has increased the exchange rate continuously over the years, even when the dollar fell in the international market. The highest level of adjustment, 9.3 per cent, was seen in 2011, and since then it had been lifted by 1 or 2 per cent per year.

Hong also noted that an IMF study had shown that the VND/ USD rate was still within appropriate limits, with no signs of misjudgement.

After the SBV's message, local commercial banks listed the US dollar at VND20 to VND30 lower than the previous day's rate.

Vietcombank's buying and selling rates for each dollar were VND21,770 and VND21,830, respectively. Other banks sold the dollar for VND21,830 to VND21,840 and bought it for VND21,750 to VND21,760.

The rates fell to similar levels in street markets too. Most money exchangers on Ha Trung street, one of the most popular spots for currency exchange in Ha Noi, bought the dollar for VND21,800 and sold it for VND21,830. — VNS

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