First Deputy Governor Dao Minh Tu: Exchange rate to be maintained stably

First Deputy Governor Dao Minh Tu speaks at the press conference

According to the SBV Deputy Governor,  the fluctuations of the exchange rate in 2023 had been caused by the impacts of the international situations on the domestic economy, making it difficult for the SBV in the exchange rate management. In the first quarter of 2024, the exchange rate had continued to experience increasing pressures. The main reasons for the increase in the recent exchange rate are: First, the US Federal Reserve (Fed) has not yet determined a specific time to loosen its monetary policy and lower the interest rate, therefore, the USD value has appreciated. The appreciation of the USD has led to the depreciation of the currencies of many countries around the world, including the Vietnamese Dong. Second, Vietnam’s policy of reducing significantly the key interest rates over the past time has resulted in inadequacies from the differences between the USD and the VND interest rates in the interbank market (the negative interest rate continues to be maintained, i.e. the USD interest rates are lower than the VND interest rates). That has also put more pressure on the appreciation of the USD. Third, in the first 3 months, the demand for foreign currencies from imports also increased. However, under the SBV’s flexible management, the exchange rate is still maintained stably, and the foreign exchange market is still operating smoothly, with the balances of foreign currencies ensured, and a positive foreign currency status for the commercial banks and the whole economy, and the legitimate demands for foreign currencies of enterprises for their import/export activities have been fully and promptly met. Furthermore, the depreciation of the VND against the USD is still lower than that of other currencies, with the depreciation of 2.9% in 2023, and a further 2.6% in the domestic interbank market since the beginning of the year, still lower than the depreciation of other foreign currencies against the USD, for example the CNY of China, the Bath of Thailand, the Won of South Korea, the JPY of Japan, which have been depreciated by 1.74%, 5.93%, 3.88%, 7.52% respectively.

The SBV Deputy Governor assessed that the exchange rate is one of the important macroeconomic management tools, because it not only affects the value and the purchasing power of the VND, but also influences other economic policies, the macro-economic stability, the inflation, the market psychology and the investors’ confidence. Therefore, the SBV always considers the exchange rate management to be one of its key missions. In the coming time, the SBV will continue to manage the exchange rate in a flexible manner in accordance with the general trends to achieve the established objectives, which are maintaining the purchasing power of the currency, the harmonization of the foreign currency situation as always in a positive status, ensuring the foreign exchange balance for the legitimate demands of the economy.

Also according to the SBV Deputy Governor, in addition to the monetary policy management tools, it is necessary to maintain the market confidence, and to avoid the hoarding of foreign currencies. In fact, with the current foreign currency reserves, the SBV can make interventions in order to ensure market stability, if necessary. This is an area that has received a lot of attention by the Government, the Prime Minister with very strong directions, and the SBV will use all available tools to manage the exchange rate, ensuring the goal of stability in the coming time.

Translated by Hai Yen