Hanoi (VNA) – Theforeign exchange market in Vietnam has heated up recently when the daily referenceexchange rate set by the State Bank of Vietnam (SBV) continuously climbed tonew record levels and the VND/USD rates listed at commercial banks also surged.

* Why did the exchange rate rise?

The SBV attributed the recentincreases in the VND/USD exchange rate to negative information on the US-Chinatrade negotiations which intensified concerns about the possibility of internationaltrade disputes. At the same time, the devaluation of the Chinese yuan since theend of April also made psychological impacts on the domestic forex market,putting more pressure on the foreign exchange rate.

Experts were also of the viewthat the rise in the exchange rate was mainly caused by the psychological factoramidst new developments in the international market. Analysts of the Bao VietSecurities Company (BVSC) said the recent fluctuations in the foreign exchangerate mainly stemmed from the changes in strong currencies such as the USdollar, Chinese yuan, British pound and Japanese yen. Since the US-China tradetensions began to intensify again, the Chinese yuan has greatly depreciated,causing pressure on the Vietnam dong.

However, the SBV seems to haveenough experience in dealing with the situation as the domestic forex markethas been under constant influence from outside factors over the past threeyears. The SBV has always issued timely messages on its abundant reserves andreadiness to interfere when necessary to keep the market stable.

It is the same scenario thistime. After the SBV announced that it is ready to sell foreign currencies atsuitable rates to stabilize the market, the forex market has cooled down andthe VND/USD exchange rate at commercial banks was immediately reined in.

As of May 29, the dailyreference exchange rate was up 236 VND compared to the rate at the beginning ofthe year, or about 1 percent. Meanwhile, the rates listed at commercial banksonly rose by around 0.8 percent.

 *Two useful tools to keep exchange rate undercontrol

The management of the exchangerate during the past several years was said to be an outstanding success of thebanking sector. It is easy to notice the positive impacts on the market made bythe daily adjustment of the reference exchange rate and the abundant foreignreserves, which enhanced the market’s trust in the management agency.

Financial-banking expert NguyenTri Hieu said the daily adjustment of the reference exchange rate and the abundantforeign reserves are the two useful tools for the SBV to maintain a stable exchangerate and the value of the domestic currency.  

Increasing the national foreignreserves is among annual tasks of the SBV. Though no specific figures are madepublic, the SBV said in a report submitted to the National Assembly recentlythat it had raised the national foreign reserves to the highest level ever.
According to BVSC experts, suchfactors as abundant foreign reserves, a surplus in the national paymentbalance, and the policy on tightening lending in foreign currencies andshifting to foreign currency trading, would limit risks to the foreign exchangerate in the remaining of 2019.   
From another aspect,financial-banking expert Can Van Luc said the USD is only one of the 8currencies under the daily management of the SBV, and the exchange rate policyhas been very flexible since 2016, which helped keep the exchange rate stablefor the past three years. Therefore, the recent rise of the exchange rate recentlydoes not call for big concern.  

Nevertheless, experts shared theview that there are still more risks ahead, as the US-China trade tension hasnot shown signs of ease.

Hieu urged the SBV to be moreflexible and continue to utilize the two tools to stabilize the exchange rate,adding that the rate could be adjusted within a trading band of 3 percent thisyear.–VNA