The State Bank of Vietnam (SBV) will keep the fluctuation of the VND/USD exchange rate at a maximum of 2 percent in 2015, as set in its policy for the year, despite the fact that the rate has already been adjusted by 1 percent twice this year.

The central bank raised the inter-bank average exchange rate between the VND and USD by 1 percent on May 7, from 21,458 VND to 21,673 VND per 1 USD. Banks may set their rate within a range of +/- 1 percent of the SBV-set inter-bank average rate.

On January 7, the SBV also adjusted the inter-bank rate with an increase of 1 percent.

SBV Deputy Governor Nguyen Thi Hong said the 2 percent fluctuation range was set on the basis of socio-economic development targets set by the National Assembly and forecasts on macro-economy and the domestic and international monetary situation.

The recent adjustments were based on economic and psychological factors along with market expectations, she noted.

The SBV will continue to closely following changes in domestic and global markets and predictions to employ appropriate monetary policy tools, ultimately keeping the exchange rate stable and within the set range, she said.

Hong said that although rapid appreciation of the VND may benefit exporters, it will be disadvantageous to manufacturers of export products made from imported materials, since they will have to pay more in VND to buy raw materials.

Data in 2013 showed that the textile and garment sector imported 82.5 percent of the necessary materials, the wood product sector 70 percent, and the footwear industry 50-60 percent, all of which produce key exports of Vietnam.

If the exchange rate adjustment exceeds 2 percent, payments on the Government’s foreign debt obligations will be increased, negatively affecting efforts to control public debt within 65 percent of GDP. Businesses’ foreign debt payments will also be raised accordingly.

The Deputy Governor also noted that the domestic currency is not overvalued, citing a recent study of IMF experts which said the VND/USD rate is in an alignment stage.

The set fluctuation range will also help curb possible inflation, even though inflation is currently under control, she added.-VNA