Over the weekend, the State Bank of Vietnam (SBV) suddenly reduced the buying price of the US dollar. The price of this money unit on the list of commercial banks was also immediately adjusted.
From the beginning of the year, except for the central exchange rate which had steadily and significantly increased due to the specific factor (reconfiguring for a more equilibrium in the correlation of exchange rates in the market), the real USD/VND exchange rate transactions between banks and businesses and residents had decreased compared to the end of 2018.
That fact had been breaking many forecasts about USD/VND exchange rate changes in 2019 made at the end of 2018 and early this year. Many predictions had the same fluctuation of an increase of over two percent, some were higher than three percent, and this was a reasonable change. The exchange rate was, on the contrary, decreasing despite a sharp fluctuation in the middle of the year.
Forecasts often had errors, which were used for reference and shaping in policymaking and administration, as well as in developing business and production plans. However, looking back, with this USD/VND exchange rate, there was absolutely no drop forecast given to the public earlier this year.
The contexts of the economy, market movements, geopolitical factors were potentially abnormal. 2019 had shown an unusual element, such as the US and China trade conflict with a series of consecutive tariffs. That was said to be one of the main factors that changed the growth trend of the global economy.
At the recent conference, Do Ngoc Quynh, director of Capital and Monetary Business, Bank for Investment and Development of Vietnam (BIDV), also emphasized the above developments, considering that as an interesting practice of the year. 2019.
Not only the exchange rate but many predictions about interest rates in 2019 had not come true.
Quynh cited that, at the end of 2018 and early 2019, most forecasts predicted that the US Federal Reserve (Fed) would continue to raise interest rates many times until the end of 2019. The Fed had reversed its interest rate policy with recent drops.
In Vietnam, no longer on the sidelines of the trend of easing monetary policy in the world, 2019 witnessed SBV simultaneously reducing operating interest rates in September.
Not stopping at that, before the end of the year peak season at which interest rates often rose, the Vietnamese market had just received a series of decisions to lower deposit and lending rates ceiling. A series of commercial banks announced to cut interest rates at the end of November 2019.
More recently, on November 26, SBV continued to sharply reduce lending rates on the open market operation (OMO) from 4.5 percent per year to four percent per year. Notably, this interest rate was once a fixed stronghold for five years. However, it was not until the beginning of 2018 that there had a very careful decrease of0.25 percentage points, then continued to adjust cautiously.
As such, both exchange rates and interest rates had vivid practices in 2019, with sharp differences, even breaking many forecasts.
Concluding, the year’s monetary policy of Vietnam had established relative stability and presented specific factors.
As with the exchange rate, even the Renminbi fluctuated sharply in the year, breaking the landmark of 7 and up to 7.2 in exchange with the US dollar. The USD/VND exchange rate even decreased slightly. Dong was in the group of leading stable money units in the world.
At the seminar, Do Ngoc Quynh said that because the exchange rate in Vietnam had many other internal factors, as well as the market structure also decisively contributing.
As for interest rates, with the last series of adjustments, the market needed a lag to gradually absorb the impact of policies, in the direction that when capital costs were eased, it would stimulate more participants to participate in the market. The expected impact value would gradually show up from the beginning of next year.
When considering in detail, the value of interest rate cuts had also quickly shown in a flow. With nearly 18 trillion dong of additional injecting to support the market in the last session of the week, the total amount of SBV offered in OMO channel had reached over 40 trillion dong, but the cost was only four percent per year instead of 4.5 percent per year or up to five percent per year in previous times.
As for the whole, in opinion of an expert when talking to BizLIVE, besides the forecasts, the calculation in monetary policy management of Vietnam, was ‘always true.’ Because, during the prior period, every year, SBV had a common orientation of three familiar words, which were active, flexible, and cautious.
