HSBC comments forex rate adjustment

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

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

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

One USD is now equivalent to 21,246 VND, instead of 21,036 VND. Therate 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 thecurrency was weakened by around 1 percent versus the USD.

HSBCsaid the outlook for the VND should be relatively stable from theselevels over the coming year, given the better balance of flows andbuid-up of FX reserves. However, lower real interest rates could pose arisk 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 arelatively loose monetary policy, but said that this one-off and smalldepreciation of the VND should not lead to an aggressive weakness in thecurrency.

The VND has been better supported by the more balancednature of FX inflows in the last year. The trade balance has beenrelatively neutral, thanks to improving exports as much as soft importgrowth. At the same time, FDI inflows have picked up, HSBC said, addingthat that together these flows have allowed the SBV to increase their FXreserves buffers.-VNA

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