The State Bank of Vietnam (SBV) is committed to a flexible approach tomanagement that maintains currency market stability and increasesforeign currency reserves, radio The Voice of Vietnam (VOV) reported.
The central bank considered 2013 a successful year, immediately andsuccessfully intervening in the market when necessary to keep exchangerates under control. It even had no need to push the limits of its ownset 2–3 percent rate adjustment margin.
A success story
The central bank’s decisions helped stabilise exchange rates, increaseforeign currency reserves, and enhanced consumer trust in the domesticcurrency.
SBV Deputy Governor Nguyen Dong Tien says the bankrecognises the importance of leaving enough management leeway to respondto any unforeseen market developments. Last year, this flexibilityhelped authorities quash damaging rumours and cool off the foreigncurrency market before pressures escaped control.
“Consistency reinforces market trust,” Tien says. “Fluctuations are only short term.”
He attributes the bank’s 2013 successes to its responsive managementof foreign currencies, gold, and the anti-dollarisation push.
“Gold is no longer a primary lending instrument. Gold traders canconduct transactions through appropriate networks. This stabilises theexchange rate.”
National Financial Supervisory Council ViceChairman Truong Van Phuoc notes the SBV removed gold from creditorganisation transactions after anticipating foreign currency marketinstability.
“These administrative interventions are tough but help maintain the value of the domestic currency against the US dollar.”
Flexible management
SBV Deputy Governor Tien affirms the central bank will continue itspolicy flexibility into 2014, hopefully reducing the economy’sdependence on dollars and gold and supporting export business growth.
He says the bank will manage the currency market according to theNational Assembly’s set 5.8 percent economic growth target and 7 percentinflation.
Economic experts concur on the need for flexibilitybut warn the ramifications of any adjustments must be examined to avoidbig shocks to the economy.
SBV Foreign Currency ManagementDepartment head Nguyen Quang Huy believes the bank’s most appropriatemanagement mechanism is currently short-term exchange rate adjustments.
The bank also needs hedging instruments to limit exchange rate risks, as rare as their use may be.
Huy says he thinks the central bank faces three major currency marketmanagement challenges in 2014: an imbalance between demand and supply,market manipulation, and unpredictable investor psychology.
Headmits management is made harder by exchange rates’ dual role as “both amanagement tool and a management target”. As an instrument, it can helpaugment foreign currency reserves, stabilise the macroeconomy, improvecompetitive capacity, and ensure credit organisations operate safely.-VNA
The central bank considered 2013 a successful year, immediately andsuccessfully intervening in the market when necessary to keep exchangerates under control. It even had no need to push the limits of its ownset 2–3 percent rate adjustment margin.
A success story
The central bank’s decisions helped stabilise exchange rates, increaseforeign currency reserves, and enhanced consumer trust in the domesticcurrency.
SBV Deputy Governor Nguyen Dong Tien says the bankrecognises the importance of leaving enough management leeway to respondto any unforeseen market developments. Last year, this flexibilityhelped authorities quash damaging rumours and cool off the foreigncurrency market before pressures escaped control.
“Consistency reinforces market trust,” Tien says. “Fluctuations are only short term.”
He attributes the bank’s 2013 successes to its responsive managementof foreign currencies, gold, and the anti-dollarisation push.
“Gold is no longer a primary lending instrument. Gold traders canconduct transactions through appropriate networks. This stabilises theexchange rate.”
National Financial Supervisory Council ViceChairman Truong Van Phuoc notes the SBV removed gold from creditorganisation transactions after anticipating foreign currency marketinstability.
“These administrative interventions are tough but help maintain the value of the domestic currency against the US dollar.”
Flexible management
SBV Deputy Governor Tien affirms the central bank will continue itspolicy flexibility into 2014, hopefully reducing the economy’sdependence on dollars and gold and supporting export business growth.
He says the bank will manage the currency market according to theNational Assembly’s set 5.8 percent economic growth target and 7 percentinflation.
Economic experts concur on the need for flexibilitybut warn the ramifications of any adjustments must be examined to avoidbig shocks to the economy.
SBV Foreign Currency ManagementDepartment head Nguyen Quang Huy believes the bank’s most appropriatemanagement mechanism is currently short-term exchange rate adjustments.
The bank also needs hedging instruments to limit exchange rate risks, as rare as their use may be.
Huy says he thinks the central bank faces three major currency marketmanagement challenges in 2014: an imbalance between demand and supply,market manipulation, and unpredictable investor psychology.
Headmits management is made harder by exchange rates’ dual role as “both amanagement tool and a management target”. As an instrument, it can helpaugment foreign currency reserves, stabilise the macroeconomy, improvecompetitive capacity, and ensure credit organisations operate safely.-VNA
