The State Bank of Vietnam (SBV)’s exchange rate management policy has been appropriate and effective, creating benefits for the economy and confidence for the market.
Speaking at a press conference held in Hanoi on Tuesday to review the performance of the banking industry in the third quarter of 2019, SBV’s Governor Dao Minh Tu said the assessment was made by members of the National Monetary Policies Council in its recent meeting.
While countries worldwide devalued or appreciated their currencies sharply, the SBV had kept the local currency relatively stable, with the management policy based on the overall balance of the economy such as import and export, public debt, balance of payments and current accounts, Tu said.
Reports from the SBV showed currently, the foreign exchange rate in the domestic market is relatively stable, increasing and decreasing slightly in comparison with the large fluctuations of currencies around the world.
Specifically, on the first two days of this week, the USD Index on the international market increased continuously to reach a two-year record high of 99.2 points. However, in the domestic market, the exchange rate at commercial banks only increased and decreased slightly.
According to the nine-month economic report by the General Statistical Office, despite big economic changes in many countries, including the US Federal Reserve (Fed)’s decision to cut interest rates by 0.25 percentage points in mid-September, the USD/VND exchange rate did not fluctuate significantly thanks to the SBV’s flexible exchange rate management policy. Specifically, the dollar depreciated slightly by just 0.11 per cent against the previous month, 0.49 per cent against December 2018 and 0.39 per cent against the same period in 2018.
As a result, the domestic market liquidity has been ensured while foreign currency transactions have been conducted promptly and smoothly. It has also helped the central bank net buy dollars to build up the nation’s foreign reserves.
According to Tu, many people think that the dong needs to be devalued to support exports as they are slowing. However, Tu said, the slowdown is seen with all countries and it isn’t feasible to use exchange rates as a tool to promote exports as import volume mainly materials and equipment to produce goods for export is also very large.
In the future, Tu said the SBV would conduct open market operations and regulate the credit institution’s liquidity at a reasonable level to stabilise the monetary market.
It would also combine other monetary policy instruments and take flexible market interventions to stabilise the foreign exchange market, which would contribute to stabilising the macro-economy and supporting reasonable economic growth and build up the nation’s foreign reserves when there are favourable conditions, Tu said.
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