The State Bank of Vietnam weakened the Vietnamese dong by 1 percent,raising the USD-VND daily reference rate from 21,246 VND to 21,458 VND.
Afterthe State Bank's decision to increase the inter-bank average exchangerate by 1 percent on January 7, numerous banks increased the US dollarexchange rate.
However, given the strength of the US dollaragainst most emerging market (EM) currencies in early 2015 and with theUS dollar-Vietnamese dong having been closing in on the topside of thebank for the past few weeks, the move does not come as a completesurprise.
HSBC experts said further Vietnamese dong weaknesswould only be moderate, as underlying fundamentals had not deteriorated.They expected another 1 percent depreciation later this year, pushingthe rate to 21,750 per dollar VND.
The experts said USD-VND hadbeen trading closer to the top side of the band through the course ofDecember in line with the much stronger US dollar seen over the last fewmonths. This shift in the reference rate should be seen as something ofa catch up with other emerging market currencies. Indeed, a 1 percentfall in Vietnamese dong versus the US dollar actually represented acontinued outperformance versus most other Asian currencies since thestart of the first quarter, they said.
There was no significantfundamental deterioration in recent weeks which led the SBV todepreciate the Vietnamese dong. Although the trade balance flipped to900 million USD deficit over the month, causing an annual 2 billion USDsurplus, FDI flow was robust, registering around 2.3 billion USD inDecember and 15.6 billion USD over 2014 as a whole.
Furthermore,inflation continued to decrease in Vietnam, pushing real interest ratesinto positive territory. Interbank Vietnamese dong rates have beenbroadly rising since October, suggesting that Vietnamese dong liquidityis not excessively loose.
In response to the State Bank'sdecision, selling prices ranged from 21,420 VND -21,450 VND andpurchasing prices were set at 21,510 VND - 21,520 VND per US dollar atcommercial banks including Vietcombank, Vietinbank, Eximbank andTechcombank.
This is the first time this year the State Bank hasadjusted the exchange rate, a move that aims to bring the market inline with the international and domestic financial market climate andstabilise the foreign exchange market. The central bank plans toimplement measures and policy instruments to stabilise the exchange rateand foreign currency market on the new rate platform.
During aconference on banking sector responsibility in 2015, Governor of theState Bank Nguyen Van Binh stressed that one of the sector's targetsthis year was maintaining the stability of the foreign exchange marketand keeping rate fluctuation below 2 percent, though he added this wouldnot be easy.-VNA
Afterthe State Bank's decision to increase the inter-bank average exchangerate by 1 percent on January 7, numerous banks increased the US dollarexchange rate.
However, given the strength of the US dollaragainst most emerging market (EM) currencies in early 2015 and with theUS dollar-Vietnamese dong having been closing in on the topside of thebank for the past few weeks, the move does not come as a completesurprise.
HSBC experts said further Vietnamese dong weaknesswould only be moderate, as underlying fundamentals had not deteriorated.They expected another 1 percent depreciation later this year, pushingthe rate to 21,750 per dollar VND.
The experts said USD-VND hadbeen trading closer to the top side of the band through the course ofDecember in line with the much stronger US dollar seen over the last fewmonths. This shift in the reference rate should be seen as something ofa catch up with other emerging market currencies. Indeed, a 1 percentfall in Vietnamese dong versus the US dollar actually represented acontinued outperformance versus most other Asian currencies since thestart of the first quarter, they said.
There was no significantfundamental deterioration in recent weeks which led the SBV todepreciate the Vietnamese dong. Although the trade balance flipped to900 million USD deficit over the month, causing an annual 2 billion USDsurplus, FDI flow was robust, registering around 2.3 billion USD inDecember and 15.6 billion USD over 2014 as a whole.
Furthermore,inflation continued to decrease in Vietnam, pushing real interest ratesinto positive territory. Interbank Vietnamese dong rates have beenbroadly rising since October, suggesting that Vietnamese dong liquidityis not excessively loose.
In response to the State Bank'sdecision, selling prices ranged from 21,420 VND -21,450 VND andpurchasing prices were set at 21,510 VND - 21,520 VND per US dollar atcommercial banks including Vietcombank, Vietinbank, Eximbank andTechcombank.
This is the first time this year the State Bank hasadjusted the exchange rate, a move that aims to bring the market inline with the international and domestic financial market climate andstabilise the foreign exchange market. The central bank plans toimplement measures and policy instruments to stabilise the exchange rateand foreign currency market on the new rate platform.
During aconference on banking sector responsibility in 2015, Governor of theState Bank Nguyen Van Binh stressed that one of the sector's targetsthis year was maintaining the stability of the foreign exchange marketand keeping rate fluctuation below 2 percent, though he added this wouldnot be easy.-VNA
