Question (Q): In recent days, the VND/USD exchange rate has shown remarkable movement. Could you please make a general assessment of this movement?
Answer (A): According to the assessment of the State Bank of Vietnam (SBV), exchange rate developments in the domestic market can be predicted because right at the beginning of 2016, the SBV applied a new method of managing the exchange rate in a more flexible manner, which allows it to fluctuate in line with daily movements in the domestic and international markets. As we can see, in the international market, the USD and other foreign currencies have fluctuated dramatically. However, through monitoring the forex market, the SBV has found that the money market has not recorded any sudden hikes in foreign currency supply and demand, liquidity was in good condition, and the legitimate foreign currency demands of institutions and individuals were met fully and promptly.
Q: Could you please talk about the SBV’s forecast for the forex market in the near-future?
A: The exchange rate was on a sharp upward trend in a very short time (in the recent days), mainly due to psychological factors, and it could be reversed in coming days or weeks. According to the SBV’s assessment, up to the end of 2016 the foreign currency supply will be supported by a number of resources such as revenues from exports, remittances, the disbursement of foreign direct and indirect investment and etc. Moreover, there has been an insignificant pressure on foreign currency demand, additionally foreign currency purchasing before the due date of contract often appears only when the exchange rate increase is not too high.
It is noticeable that the SBV has permitted credit institutions to continue providing foreign currency loans until the end of 2017 (in line with Circular No.24), thereby contributing to support for the market.
Q: Could you please explain how the SBV will stabilize the forex market in future?
A: The SBV will continue to closely monitor macro-economic and monetary developments in the domestic and international markets, and proactively take the appropriate measures and manage tools to stabilize the forex market, including selling foreign currencies, to intervene in the market.
Le Hang