HCMC – The State Bank of Vietnam (SBV), the nation’s central bank, has decided to widen the trading band of the Vietnamese dong currency from 3% to 5% on either side of the daily central exchange rate amid the strong rise of the U.S. dollar against many other currencies.
The Banking Operations Center of the SBV today quoted the dong-dollar exchange rate at VND24,380 per dollar, up by VND455. The central exchange rate quoted by the SBV today was VND23,586.
The currencies of many of Vietnam’s major trading partners have been devalued against the greenback, thus piling pressure on the Vietnamese dong which the SBV has tried to stabilize by selling huge amounts of U.S. dollar funds.
By the end of May this year, the country’s foreign exchange reserves had declined by US$4.5 billion compared to late 2021, at US$102.89 billion, International Monetary Fund data showed. Recent estimates by domestic organizations put the amount of foreign currency sold by the SBV in the year to September had reached US$13 billion, equivalent to more than 11% of the foreign exchange reserves recorded in late January this year.
The widening of the dong’s trading band, with effect from today, October 17, is an indication that the central bank will let the domestic currency depreciate against the dollar.
The SBV said in a statement on its website: “Since early 2022, the U.S. Federal Reserve (Fed) and other major central banks have stepped up monetary tightening and hiked interest rates while the Russia-Ukraine conflict has led to supply chain disruptions, fuel price spikes and runaway inflation, which have caused market tumult at home and abroad.”
The central bank said it would continue closely monitoring market developments, coordinate monetary policy tools, and stay ready to sell foreign currency to stabilize the market if need be.