Illustrative image (Photo: Minh Son/Vietnam+) Hanoi (VNA) - Thanks to timely interventions of the State Bank of Vietnam, the domestic exchange rate was eased to the end of 2022. The USD/VND exchange rate was 3.5% higher than at the beginning of the year.
Before the international tightening of monetary policy to deal with escalating inflation, the market witnessed the rapid increase in the value of the USD, to the highest level in 20 years. In contrast, the EURO and other foreign currencies were pushed to the bottom, the lowest in the past 20-37 years.
The dong depreciated by nearly 9% against the USD as a part of Vietnam’s economic picture. This figure shows that exchange rate pressure is huge, forecasting more fluctuations as the global financial picture remains unpredictable for 2023.
Since September 2022, the domestic foreign exchange market has been under great pressure as global inflation continuously increased. The US Federal Reserve (Fed) continuously adjusted interest rates, causing the dollar to rise to its highest level in 20 years.
In this context, the State Bank of Vietnam increased the selling price of USD six times within two months (from September to November 2022), with a total increase of 1,720 VND, equivalent to 7.4%.
Along with the decision to increase the USD selling price, on October 17, the State Bank of Vietnam announced the decision to adjust the USD/VND spot exchange rate band from ±3% to ±5%, effective immediately.
The selling price of USD immediately increased sharply from 23,925 dong to 24,380 dong, equivalent to an increase of 455 dong. This is the sharpest increase by the State Bank for many years.
Transactions at a bank counter (Photo: Reporter/Vietnam+) Also during this period, the State Bank increased the sale of foreign currency from the national foreign exchange reserve fund to intervene in the market and restarted the issuance of T-bills on the open market to support liquidity after two years of temporary halt.
In the past year, the State Bank raised operating interest rates twice sharply to balance the fluctuations in the USD/VND exchange rate.
Thanks to the timely interventions of the State Bank, along with new changes in the world market, by early November 2022, the domestic exchange rate began to soften.
By the end of 2022, the USD/VND exchange rate was only about 3.5% higher than at the beginning of the year, lower than that of other currencies in the world (such as the RMB down 9.86%, the Korean Won down 8.64%, Japanese Yen down 14.97%).
Stabilising demand for foreign currency to import petroleum (Photo: Reporter/Vietnam+) SSI experts assessed that the value of the USD increased rapidly, causing many currencies in the world to depreciate sharply. Vietnam was no exception, although the dong devaluation was among the lowest in the world.
According to SSI, the decrease in the exchange rate at the end of the year was thanks to rising foreign currency supply, when FDI capital and foreign currency loans were disbursed.
Experts say pressure on the exchange rate may return, but it is unlikely to be as negative as in 2022.
According to the plan, the US Federal Reserve will continue to raise interest rates in 2023, but the pressure will ease as the USD appreciation against most other currencies, including the dong, has slowed down./.
