Illustrative image (Source: VNA)

Hanoi (VNA) – The reference exchange rate saw a rise in recent days after staying flat for several months, leading experts to say domestic economic factors plus flexible management by the State Bank of Vietnam (SBV) would stabilise the market.

The reference exchange rate was set at 22,602 VND/USD by the central bank on June 19 morning. The rate has been maintained for two consecutive sessions, and the second highest rate since the beginning of this year, compared with 22,605 VND/USD on May 19.

Le Quang Trung, Deputy Director of the Vietnam International Commercial Joint Stock Bank (VIB), said the hike was mainly due to external factors.

Trung explained that the US dollar rose sharply after the US Federal Reserves (Fed) decided to raise interest rates. Besides, other currencies in the SBV’s basket also surged, resulting in the increase of the VND/USD rate.

He said the higher reference exchange rate has aided Vietnam’s exports.

Nguyen Duc Hung Linh from Saigon Securities Incorporated (SSI) said the reference exchange rate set by the SBV increased 27 VND/USD compared with the rate before June 12, two days ahead of the Fed’s interest rate hike. Meanwhile, official rates listed at commercial banks also inched up about 20 VND/USD.

Experts said the Fed’s increase of interest rates will not greatly affect foreign capital flow to Vietnam.

Ngo Dang Khoa from the Hong Kong-Shanghai Banking Corporation (HSBC) in Vietnam said the Fed’s interest rate adjustment will not pose significant impacts on foreign direct investment in Vietnam as it is long-term capital.

It mainly impacts short-term interest rates while long-term ones still stand at 2.8 percent. Meanwhile, major investors in Vietnam mainly come from the Republic of Korea (RoK), who are not overly sensitive to US interest rates.

The VND/USD rate has also had little effect on remittances to Vietnam because the increase is not too high, Khoa said.

Trung said the VND/USD rate will remain stable until the end of this year and the value of Vietnam dong may lose 1-2 percent, although the Fed plans to adjust interest rates up two times from now till the end of 2018.

Pham Thanh Ha, head of the Policy and Monetary Department of the SBV, told a recent press conference that the central bank will manage the reference rate flexibly in conformity with developments of the market.

The bank will also scale up foreign reserves when necessary, Ha said.-VNA