Illustrative image (Photo: VNA)

The State Bank of Vietnam (SBV) will continue employing synchronous measures and monetary policy tools, including the selling of foreign currencies when needed, to ensure the balance of foreign currency demand and supply, ultimately stabilising the monetary market and keeping the Vietnamese Dong (VND)’s exchange rates within the allowed band.

The SBV’s press release on September 20 clarified that on September 17, the US’s Federal Open Market Committee (FOMC) concluded its two-day meeting, deciding to leave the Federal Funds Target Rate unchanged due to the country’s failure to achieve its 2-percent inflation goal and recent fluctuations in the global financial markets.

A press release following the meeting said: “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term”, and the FOMC “is monitoring developments abroad.”

As such, global economic and financial developments will continue to play an important role in the Federal Reserve System (FED)’s consideration of interest rate hikes in the time ahead, the Vietnamese central bank said.

The SBV stressed the possibility that the FED’s interest rate increase was reflected in the interest and exchange rate fluctuations in the international financial markets since late 2014, including the SBV’s adjustments to the average inter-bank VND/USD exchange rate and VND/USD trading band.

The VND exchange rate now has enough room to be flexible to cope with negative impacts from the domestic and foreign markets through early 2016.

The FED’s rate rise in the near future will not affect the SBV’s exchange rate stabilisation orientation, the central bank’s release emphasised.

The SBV has lifted the average inter-bank VND/USD exchange rate three times so far this year by 1 percent each. The most recent move on August 19 raised the average inter-bank exchange rate from 21,673 VND to 21,890 VND per one USD and widened the trading band of VND/USD from +/- 2 percent to +/- 3 percent. The first two adjustments were made on January 27 and May 7.-VNA