Central bank looks to up foreign reserves (Illustrative image. Source: baodautu.vn)This is the third time this year it hasincreased the buying rate for the greenback. The first two hikes were made inJanuary and April with a total increase of 100 VND.
With the rise, the value of the dollaragainst the dong listed at the SBV’s centre is some 70 VND higher than that ofcommercial banks.
On June 22, Vietcombank and BIDV maintainedboth buying and selling rates unchanged from the day ago at 22,690 VND and 22,760VND.
The rates at Techcombank were 22,650 VND (buying)and 22,770 VND (selling), the same as those on June 21.
After increasing the daily reference dong/dollarexchange rate by 18 VND on the first three days of the week, the central bankon June 22 continuously adjusted the rate up by five dong from the previous dayto 22,433 VND.
With the current trading band of /- 3 percent,the ceiling rate applied to commercial banks during the day was 23,105 VND andthe floor rate was 21,760 USD per dollar.
According to analysts, the buying rate hikeby the SBV’s transaction centre is aimed at encouraging commercial banks to buydollars from the currency holders at higher prices. The banks will then selldollars to SBV’s centre, helping the central bank expand its foreign reservesto prepare for any fluctuation that may occur if the US Federal Reserve (Fed)increases interest rates.
Last week, the Fed raised the interest rateby 0.25 percentage points. This was Fed’s third consecutive interest rate hikein six months. Surprisingly, following the Fed’s move, the domestic foreigncurrency market remained stable.
According to banking expert Can Van Luc,there were some reasons for this stability.
Apart from the fact that world financialmarkets witnessed no fluctuation, the SBV’s flexible central rate managementmechanism helps the domestic foreign exchange market be less affected byforeign factors.
Besides this, the domestic supply-demandrelationship of the dollar is relatively stable. The foreign currency supply fromexports, FDI, ODA disbursement, tourism and remittances has grown positively inthe first five months, Luc said.
Although there was no impact on theexchange rate following the Fed’s decision, experts said pressure on exchangerate is likely, which comes from both sides -- serious trade deficit and strongincrease in foreign currency loans.
Ngo Dang Khoa, head of trading at HSBCVietnam, told Dau tu (Vietnam Investment Review) that the trade balance runs adeficit of some 2.5 billion USD since the beginning of this year and is likelyto expand to 7 billion USD at the end of the year, which will put certainpressure on the exchange rate at some point.
Khoa recommended that even in caseactivities are undertaken to prevent interest rate and exchange rate risks,businesses should still monitor the market and use reasonable risk preventionmethods.-VNA
VNA
