The Hong Kong-Shanghai Bank Corporation (HSBC) has updated its Data Reactions on Vietnam ’s economy, to take into account the latest adjustment of the VND/USD exchange by the State Bank of Vietnam.

“This should not come as a major surprise given that the USD-VND had been trading on the top side of the daily band and given recent comments from the SBV Governor,” said a press release issued by HSBC on June 19 in response to the central bank’s 1 percent rise in the rate.

The SBV on June 18 announced that the VND/USD inter-bank exchange rate would increase as of June 19 after remaining intact for a year.

One USD is now equivalent to 21,246 VND, instead of 21,036 VND. The rate at banks can be 1 percent lower or higher than the interbank rate, ranging between 21,034 and 21,458 VND per 1 USD.

According HSBC, this is the first shift in the rate since June 28, 2013 when the currency was weakened by around 1 percent versus the USD.

HSBC said the outlook for the VND should be relatively stable from these levels over the coming year, given the better balance of flows and buid-up of FX reserves. However, lower real interest rates could pose a risk further down the line if demand and inflation start to pick up.

Additionally, the financial institution said it had been wary of risks posed from a relatively loose monetary policy, but said that this one-off and small depreciation of the VND should not lead to an aggressive weakness in the currency.

The VND has been better supported by the more balanced nature of FX inflows in the last year. The trade balance has been relatively neutral, thanks to improving exports as much as soft import growth. At the same time, FDI inflows have picked up, HSBC said, adding that that together these flows have allowed the SBV to increase their FX reserves buffers.-VNA