HCMC–Given the exchange rate increase in the past days triggered by rumors about the possibility of the central bank adjusting the price of the Vietnam dong, deputy governor Nguyen Thi Hong said the bank would keep the rate steady in the coming time.
As reported on the central bank’s website on October 6, Hong said the volatility of the exchange rate was due to psychological factors and that the bank would keep the inter-bank rate unchanged.
Besides, the central bank will continue closely monitoring the market and synchronously adopting monetary policy to stabilize the market and exchange rate. The bank will sell foreign currency to stabilize the rate if necessary.
Stabilizing the current rate aims to ensure stability of policy and is based on inflation projections this year and next, Hong said.
Since September 22, the exchange rate has picked up from VND21,210-21,220 to the dollar to VND21,325-21,330. The exchange rate increase recorded late last month was understandable as it was the end of quarter three and enterprises had greater demand to settle import bills in dollars or to remit profits to their parent companies overseas.
However, as of early this month when the payment demand declined, the exchange rate has still kept rising due to the psychological factors driven by rumors.
The rumors that the central bank is about to revise up the exchange rate have surfaced after central bank governor Nguyen Van Binh said at the question-and-answer session at the National Assembly Standing Committee on September 29 that there were no grounds for exchange rate adjustment and if the rate was revised, the increase would be only around 1.43% for the entire year.
Meanwhile, since the year’s beginning, the central has adjusted the exchange rate by 1%, meaning the possible room for a rate hike will be 0.43%.
According to Hong, though the exchange rate has been inching up in the past days, the rate on the inter-bank market has still stayed far from the upper limit.
The central bank’s website also cited Hong as saying current foreign currency supply and demand were still stable and a significant trade surplus in January-September. In addition, the demand for foreign currency of organizations and individuals is small.
After the central bank lifted the exchange rate up 1% on June 19, liquidity on the market is quite good with an average transaction amount ranging between US$900 million and US$1 billion a day.
In the past time, the inter-bank interest rates have stayed low, leading some credit institutions to buy foreign currency to cover their short positions. But this is not a major reason for the foreign currency rise as excessive liquidity of dong has declined while credit growth is bouncing back (up 7.26% in the nine-month period), according to Hong.
The exchange rate posted at Vietcombank dropped to VND21,310 at noon on October 6 after climbing to VND21,325 in the morning.
Source: Stoxplus