Illustrative image (Source: VNA)
The State Bank of Vietnam (SBV) will keep a close watch on the developments of domestic and global macro economies and monetary markets to assure synchronous exchange rate management, said SBV Deputy Governor Nguyen Thi Hong.

The SBV official told the Vietnam News Agency that the move aims to curb inflation, stabilise the macro economy and spur national economic growth.

According to Hong, the central bank predicted early this year that changes in the international financial market would impact Vietnam’s exchange rate and export-import activities. So the bank revised the interbank exchange rate two times with a total hike of 2 percent.

However, the People’s Bank of China (PBoC) on August 11 announced a 1.9 percent devaluation of the Yuan, which resulted in the depreciation of major currencies in Asian countries – some of Vietnam’s big trade partners.

To prevent negative impacts on Vietnam’s exchange rate and export-import activities due to fluctuation, the SBV decided to raise the exchange rate amplitude from +/-1 percent to +/-2 percent from August 12.

The domestic monetary market still had no time to relax as worries over the US Federal Reserve (Fed)’s possible interest rate increase began to spread, she further said.

In that context, the central bank continued to expand the interbank average exchange rate by 1 percent and the VND/USD exchange rate amplitude from +/-2 percent to +/-3 percent from August 19.

Hong said the adjustments help Vietnam’s exchange rate flexibly cope with unfavourable developments in the domestic and international economies that may occur in the remaining months of this year and even the first few months of 2016. This would ensure the stability of the foreign exchange market and the competitiveness of goods made in Vietnam.

With such preparations, the Fed’s interest rate rise will not affect the SBV’s exchange rate, she affirmed, noting that with the resolve to stabilise the market, the bank already has necessary solutions and equipment prepared to keep the exchange rate stable.

The deputy governor said the central bank considered heightening the Vietnam dong’s position and constraining dollarisation in accordance with the Government’s guidelines an essential task.

Hong cited the SBV’s decreases of US dollar deposit rates to 0.25 percent per year for individuals and 0 percent per year for organisations as examples.-VNA