In an interview with the press, Mr. Pham Chi Quang, Deputy Director General in charge of the Monetary Policy Department of the State Bank of Vietnam (SBV), said : “the SBV will enhance its intervention by increasing the frequency of selling foreign currencies to the market, thereby creating favorable conditions for the credit institution system to fully and promptly meet the legitimate demands for foreign currencies of organizations and individuals, including the demand for foreign currencies to import essential commodities for domestic production, business and export operations, thereby contributing to maintaining the stability of the market and supporting the economic recovery”.
Below is the full text of the interview.
Question (Q): Could you please make a general assessment of the international financial market in the first months of 2022 and its impacts on the USD/VND exchange rate?
Answer (A): Since the beginning of 2022, the international market has been developing complicatedly with many unpredictable movements: the political tension between Russia and Ukraine has negatively affected the global financial system, with strong impacts on the energy and other commodities’ prices, seriously affected and disrupted the global supply chains; the central banks have accelerated the tightening of the monetary policy; raised the key interest rates to control the inflation pressures; the financial and monetary markets have fluctuated remarkably. In that context, the US Federal Reserve (FED) has thrice raised its key interest rate within just six months of 2022; with the interest rate increases announced on June 15 (0.75 percentage points) being the highest increase over the past 28 years. And the FED is expected to continue to tighten its monetary policy in the coming time. The USD has appreciated strongly (the DXY index has increased by about 10% since the beginning of 2022), causing the currencies of many large and developing economies to depreciate sharply. These developments have adversely affected the balance of supply and demand of foreign currencies, and the customers’ psychology in the domestic market, putting pressure on the stability of the exchange rate and the forex market.
In that context, the USD/VND exchange rate has reversed its downward trend in 2021, and has increased by about 2% since the beginning of 2022 as compared to that of the end of 2021. Despite the strong fluctuations in the international market, the domestic forex market is still stable, the market liquidity has been smooth, and the legitimate demands for foreign currencies have been fully and promptly met, especially the demand for foreign currencies to import essential commodities for serving production and business operations in the context of a sharp increase in energy and commodities’ prices.
Q: Do you think those exchange rate movements are appropriate? Should the SBV conduct any intervention measures?
A: In that difficult and complicated context, the SBV has managed the exchange rate in a way that has both created room for the exchange rate to develop flexibly, absorbing the external shocks, and intervened into the forex market to limit the fluctuations of the exchange rate, contributing to maintaining the stability of the forex market and the macro-economy, and controlling the inflation. Since the beginning of 2022, the SBV has intervened by sell foreign currencies using appropriate means in order to supply foreign currencies to the market, thereby meeting the legitimate foreign currency demands of the economy. In addition, the SBV has always maintained an abundant liquidity of the VND in order to support the stability of VND interest rates, thereby supporting the socio-economic recovery and development in accordance with Resolution 43 of the National Assembly and Resolution 11 of the Government.
The USD/VND exchange rate has so far increased by about 2% as compared to that of the end of 2021. That has been consistent with the conditions and developments of the international and domestic markets, as well as the overall goal of the monetary policy management, which is to contribute to maintaining the stability of the money market and the macro-economy, and controlling the inflation.
Q: Will there be any changes in the SBV’s exchange rate management in the coming time?
A: As mentioned above, maintaining the stability of the money market and the macro-economy, and controlling the inflation are consistent goals in the SBV's monetary policy management, especially in the context of hiking global inflation, so the SBV will continue to manage the exchange rate in an appropriate manner to achieve these goals, as well as to support the implementation of the Socio-Economic Recovery and Development Program. Accordingly, the SBV will coordinate and manage the VND liquidity in a synchronous manner to support the stability of the exchange rate, the forex market and the common interest rates. In the recent years, when the market conditions are favorable, the SBV has purchased a large amount of foreign currencies to increase its foreign exchange reserves. In the context of unfavorable market conditions and high pressures, with the size of the foreign exchange reserves that have been purchased and strongly consolidated by the SBV in the previous periods, the SBV has sufficient room to continue selling foreign currencies to maintain the stability of the market. Accordingly, the SBV will enhance the intervention by selling foreign currencies in order to supply foreign currencies to the market with higher frequencies, thereby creating favorable conditions for the credit institution system to fully and promptly meet the legitimate demands for foreign currencies of organizations and individuals, including the demand for foreign currencies to import essential commodities for domestic production, business and export operations, thereby contributing to maintaining the stability of the market and supporting the economic recovery.
Q: Thank you!
Le Hang