The SBV adjusted the reference exchange rate on July 3 in a move to stabilize the USD/VND exchange rate.
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Following SBV's intervention, market participants can now purchase USD at a lower price, as the USD/VND exchange rate quoted by commercial banks decreased to under VND23,100 instead of VND23,120 on July 3.
On July 2, Pham Thanh Ha, head of the Monetary Policy Department (SBV) stated the SBV may sell foreign currency at price lower than the current exchange rate, with the aim of stabilizing the macro-economy.
Ha also pointed out pointed out two main reasons behind the increasing selling price of USD in the free market, which is now around 1.2% higher compared to the end of 2017.
Firstly, the increasing USD interest rate in the inter-bank exchange rate is closely related to the global market, while that of VND is still at low level, leading to a sharp appreciation of the USD against the VND.
Secondly, internal and external factors have affected the market psychologically, such as recent slumps of the benchmark VN-Index in the domestic stock market, or a firmer US dollar in the world market.
The SBV will continue monitoring both domestic and foreign financial market conditions in the time to come, Ha added. "Especially impacts from a stronger USD against other currencies following the FED hinting more aggressive rate hikes this year, a potential escalation of trade tensions between the US and China, as well as moves from the European Central Bank (ECB) and the Bank of Japan (BoJ)."
"Taking into account the domestic demand and supply of foreign currency, the SBV will adopt a more flexible management of the central rate," he stressed.
SBV's net purchase of foreign currencies exceeded US$11 billion in the first half of 2018, taking the nation's foreign exchange reserves to approximately US$63.5 billion, said SBV Governor Le Minh Hung at a government meeting on July 2.
"This shows the bank has sufficient resources and instruments to stabilize the USD/VND exchange rate and more importantly the market conditions," the governor added.
