From the beginning of 2020 until the Lunar New Year, with abundant foreign currency supply and favourable international markets, the market rate is quite stable, the State Bank of Vietnam (SBV) has continued to buy large amounts of foreign currencies, which increases foreign exchange reserves.
After the Lunar New Year, although the foreign exchange market was under certain pressure from the spead of the Covid-19 epidemic, the exchange rate fluctuations were not too large. When the exchange rate fell close to the buying rate of SBV, the credit institutions continued to sell foreign currencies to SBV.
However, from the beginning of last week, the exchange rate tended to increase as the fluctuations in the world financial market became stronger. Domestically, the selling rate in the free market has soared to nearly 24,000 dong while the exchange rate in the market is about 23,600 dong.
Talking to the press about this issue, Pham Thanh Ha, director of SBV Monetary Policy Department said that due to the complicated situation of the Covid-19 epidemic, the currencies in the world fluctuated and the currencies of many Vietnam’s major trading partner countries also depreciated.
Ha added that although the central banks of many countries have continuously made policy moves to support market liquidity, these policies need to be delayed before effective effects on the market. In line with this trend, the exchange rate between dong and US dollar has also increased recently when the fluctuations in the international market and the spread of Covid-19 epidemic have affected domestic market sentiment.
“However, through the monitoring, the balance of supply and demand of foreign currencies has basically no big changes. The trade balance of goods reached a surplus of $1.82 billion in the first two months of 2020 and continued to have a surplus of $880 million in March 2020. The foreign currency position continues to remain positive. The legitimate foreign currency demands of customers have been fully met by the credit institutions,” emphasized by the SBV leaders.
The director of the Monetary Policy Department said that in the near future, SBV would continue to closely monitor the movements of domestic and foreign markets, prevent possible scenarios, manage the central exchange rate flexibly and appropriately, and continue to use synchronous monetary policy measures and tools to stabilise the foreign exchange market.
Pham Thanh Ha further informed that in 2019 and the first months of 2020, SBV had been continuously buying large amounts of foreign currencies to supplement the State foreign exchange reserves, contributing to strengthening the national monetary and financial security, and increasing ability to intervene in the foreign exchange market when necessary.
“With such available foreign currency potential, SBV is willing to intervene in the market when necessary at a rate of intervention selling price lower than the current listed exchange rate on a large scale, in the form of spot and forward (if necessary) to stabilise the foreign exchange market, contributing to macroeconomic stability,” said the SBV’s leader.
Regarding exchange rate movements, some experts believe that the domestic exchange rate will soon stabilise.
Specifically, according to Bui Quang Tin, the pressure from the world US dollar price on the domestic exchange rate is only short-term.
“With a vaccine, the investor confidence will return, business confidence will return, governments’ confidence will return, the economy will recover, and commodity markets will naturally increase, followed by the improvement of stock, real estate, gold, and oil. The exchange rate will then stabilise because the US dollar is no longer a channel of refuge,” the expert stated.
In a recently published report, the experts of VNDirect Securities Company said that the central banks’ loosening monetary policy would balance the move of loosening US currency, causing the US dollar to weaken again. Therefore, impacts on domestic exchange rates will be neutralised. VNDirect forecasts that the USD/VND exchange rate will be stable at 23,300-23,500 in the first half of 2020.
