Central bank begins currency intervention to address market volatility
VOV.VN - The State Bank of Vietnam (SBV) has begun selling US dollars to intervene in the currency market for banks that have a negative foreign currency balance and those that want to buy, said Pham Chi Quang, an official of the central bank, at a press briefing held on April 19.
The currency intervention move comes as the spot exchange rate between the local currency VND and the US$ has moved close to the 5% mark since the beginning of the year.
This strong intervention measure is expected to relieve market psychology, clear supply, and ensure smooth foreign currency liquidity, said Quang, who is director of the Monetary Policy Department of the central bank.
The State Bank is currently selling US$1 for VND25,450, equal to the selling exchange rate listed at the State Bank Exchange in Hanoi.
The US$/VND exchange rate has been on an upward trajectory over recent days. Indeed, Vietcombank on April 19 bought US$1 for VND25,133 and sold US$1 for VND25,473, equal to the prescribed ceiling rate. The latest exchange rate has increased by more than 5% compared to the beginning of the year.
Quang attributed the heating up of the local foreign currency market to both external factors and local rising demand. According to information given by the official, the US Federal Reserve is likely to cut interest rates due to high inflation, a move that is contrary to investors’ expectations. Meanwhile, local businesses are in dire need of foreign currencies as they seek to import materials for production.
At the press briefing, Dao Minh Tu, deputy governor of the SBV, pointed out that throughout the first three months of the year the central bank had closely monitored market fluctuations and managed the central exchange rate flexibly, thereby creating conditions for import and export activities.
However, he stated that sharp market fluctuations occurring globally had caused the domestic currencies of many countries to depreciate strongly, ranging from over 3% to nearly 9%. Vietnam is no exception, with its exchange rate devalued by 4.9% compared to the beginning of the year.
The central bank stands ready to intervene in the market in the event that the exchange rate continues to have adverse impacts, affirmed Tu, adding that foreign exchange reserves over the years have still been guaranteed when the operator has decided to intervene in the market.
Basically, currency intervention is needed to ensure market liquidity is smooth, and legal foreign currency needs are fully met, he stressed.
