Under the decision, the rate is up from VND21,246 to VND21,458 per USD, around which VND/USD is allowed to trade within a +/- 1 percent range.
The research department of the Hong Kong and Shanghai Banking Corporation Limited (HSBC) said the SBV’s early move is in line with a much stronger growth of USD against other emerging market (EM) currencies since the beginning of 2015 and with the US dollar-Vietnamese dong having been closing in on the topside of the band for the past few weeks.
HSBC and ANZ gave positive reviews on the State Bank of Vietnam (SBV)’s decision to raise the VND/USD daily reference rate by 1%.
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HSBC experts viewed the reference rate adjustment as a catch-up with other EM currencies. A one percent fall in Vietnamese dong versus the US dollar actually represented a continued outperformance versus most other Asian currencies since the start of the first quarter last year, they said.
None notable deterioration that could lead the SBV to devaluate the Vietnam Dong, has been recorded recently. Despite the 900-million-USD deficit in December 2014, foreign direct investment flows maintained its momentum with total registered FDI worth US$2.3 billion within the same month.
Besides, inflation continued to decrease in Vietnam, pushing real interest rates into positive territory. Higher interest rates can help ease some USD demand pressures following the shift of the VND/USD reference rate, but creating a monetary policy challenge.
Based on their market research, HSBC experts expected the VND to continue depreciating by one percent, resulting in the rate of around VND21,750 per USD by the end of 2015.
Sharing the same opinion with HSBC, Australia and New Zealand Banking Group Limited (ANZ) noted this was the first adjustment of the VND seen in the last six months and forecast a new VND/USD daily reference rate (VND22,050 per USD) by the year’s end.
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