HANOI: The State Bank of Vietnam (SBV) has denounced a rumour about changes in its exchange rate management as inaccurate and inconsistent with the government’s goal for market and macro-economic stability.
Director of the SBV’s Monetary Policy Department Pham Chi Quang said that the rumour has created instability in the market, and added that businesses and people need to be cautious about inaccurate rumours.
According to Quang, the recent depreciation of the Vietnamese dong against the US dollar was due to the greenback strengthening in the international market and increasing demand for dollars on the domestic front in the wake of rising import demand.
However, he said, the depreciation of the Vietnamese dong was at the same level as that of other currencies in the region and the across the globe.
The dong has depreciated by about 5% against the US dollar.
The rate is similar to the devaluation trend of regional currencies, such as the Taiwan dollar (minus 5.06%), Thai baht (minus 6.31%), South Korean won (minus 5.66%), Japanese yen (minus 10.87%), Indonesian rupiah (minus 3.87%), Philippine peso (minus 4.82%) and Chinese yuan (minus 2.04%).
Year-to-date, the Malaysian ringgit has appreciated more than 2% against the US dollar.
“With the present exchange rate management mechanism and a margin of plus-minus 5%, the foreign exchange rate has enough room for flexible developments.
“Thus, some recent information about changes in the SBV’s exchange rate management is inaccurate and inconsistent with the government’s goal of the market and macro-economic stability,” Quang said.
Though the international environment remains challenging and unpredictable, pressure on the foreign exchange rate will ease thanks to a solid macro-economic and foreign relations foundation, as well as the US Federal Reserve’s (Fed) expected reduction of interest rates by the end of the year.
Difficulties in the domestic foreign currency market are short term, because with a recovery of exports, the market’s foreign currency supply will increase.
Meanwhile, as businesses recently increased their foreign currency forward purchases, demand for foreign currency in the future will decline.
Therefore, the balance of foreign currency supply and demand is likely to improve in the coming weeks.
The international financial community also maintains a view that the Fed will likely cut interest rates by the end of 2024, thereby reducing pressures on world currencies, including the dong.
“Based on the domestic and foreign factors mentioned above, many international organisations predict the Vietnamese dong could appreciate again when these factors are gradually realised,” Quang said.
He added that in the coming weeks, the SBV will continue to manage the exchange rate flexibly, and in accordance with market developments.
“The central bank will simultaneously implement suitable monetary policy tools, including the sale of the US dollar, to intervene and support market liquidity to meet legitimate dollar needs.
“This will contribute to stabilising the market and macroeconomy, as well as controlling inflation,” Quang said. — Viet Nam News/ANN
