Foreign currency exchange under control
The State Bank of Vietnam (SBV) has reassured the market that foreign currency exchange remains under control and that solutions will be applied if needed.
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“The recent fluctuations in the exchange rate are due to psychological factors and there could be a turnaround in the time to come,” Ms. Hong said in a written interview published on the SBV’s website on November 25.
The latest response from the central bank had an effect, as the Vietnam dong (VND) cooled down slightly on November 25 after being somewhat overheated during the last week.
Hong’s response comes after the VND hit its lowest level against the dollar for five months on November 18, of VND22,137, and then an all-time high of VND22,600 on November 24.
Last week the VND came under increasing pressure, with investors betting that the US Federal Reserve would increase interest rates next month.
Market participants believe that President-elect Donald Trump’s promise to pump more money into the US economy through infrastructure investments would push up inflation and lead to higher interest rates, which, in turn, would strengthen the dollar as investors flock to the greenback.
From a foreign perspective, Mr. Stephen Wyatt, CEO of real estate consultants JLL Vietnam, said that any global stock market chaos will have an impact on local markets at least in the short term, with the currency expected to see some volatility.
He believes, though, that “much of this will be a reaction to the election and driven by sentiment.”
“In the medium term, some commentators suggest that the Presidency, the House and the Senate being all under Republican control would strengthen the US dollar, which in turn makes Vietnamese exports more difficult and less attractive,” he said in a JLL Vietnam's public statement released on November 24.
The SBV set its daily reference mid-point rate for local banks’ forex trading at VND22,137 on November 25, the highest level since the reference rate was first used on January 4.
With the allowable trading margin on the dollar at 3 per cent on either side of the reference rate, commercial banks and unofficial market traders revised their selling prices upwards on the US dollar against the VND.
On November 25, banks set their selling prices at VND22,700 and unofficial market traders set VND22,750. In the global market, the US dollar reached its highest level for 14 years on November 24, thanks to better economic indicators for the US and a declining Chinese yuan.
In the global market, the US dollar Index, which tracks the greenback’s performance against 16 other currencies, climbed 0.6% to 91.87, its highest level since December 2002, according to the Wall Street Journal Dollar Index.
