HANOI: Possible changes in the interest rate in the United States will not impact Viet Nam’s goal to maintain exchange rate stability over the next few months, the central bank affirmed.
The State Bank of Viet Nam (SBV) said in a news release on September 20 that the possibility of the US Federal Reserve (Fed) raising rates had already been reflected in moves of interest and exchange rates in the world’s financial market since late 2014.
The central bank added that this probability had also been taken into account in domestic scenarios for inter-bank exchange rates and trading bands of the rates, which had been adjusted over the last few months.
“The room for the dong exchange rate [fluctuations] has been adequate for flexible adaptation to disadvantages that may happen in the global market, not only during the rest of 2015 but also during the first few months of 2016,” the central bank said.
Last month, the SBV devalued the dong by one per cent, and widened the trading band for the reference rate to three per cent, in a bid to minimise the negative impact of the sharp Chinese yuan depreciation.
Market speculations about a Fed rate hike have fuelled worries about even more pressure on the domestic currency and economy, especially when Viet Nam’s current account balance is sliding into a deficit. However, the dollar-dong exchange rates have eased last Friday following a decision by the Fed to keep its interest rates steady.
While the Fed said it will continue to monitor global market developments for the rate adjustment in the future, the SBV said it is willing to sell foreign currencies to intervene in the market if necessary, for a stable foreign exchange market, and exchange rates that operate in the permitted band. Currently, the average inter-bank exchange rate is VND21,890 per dollar.
