HCMC – The State Bank of Vietnam (SBV) will likely pump more foreign currencies this year to keep the forex market stable as the recent interest rate hike by the U.S. Fed is piling pressure on the domestic market, said an official with the central bank.
Pham Chi Quang, deputy director of the Monetary Policy Department under the SBV, said given foreign reserves exceeding US$100 billion, the central bank has been selling the greenback to keep the domestic forex market stable. “In the coming time, the SBV will increase the frequency of market intervention to spur forex supply for domestic demand,” Quang was quoted by the news site VnExpress.net as saying on June 20.
By boosting forex supply, the central bank will enable credit institutions to promptly meet the demand for foreign currency, he said.
The move by the central bank is seen as a response to the Federal Reserve’s recent decision to raise the policy rate by 0.75 percentage points, which is the single highest rate hike over the past 28 years. This is the third time this year Fed has hiked the policy rate, and the U.S. central bank is poised to continue its monetary tightening policy.
The rate hike has resulted in the greenback appreciating strongly, while the currencies of many other developed and developing economies have tumbled. These developments have adversely affected Vietnam’s forex market stability in terms of the forex supply-demand balance and the appetite for the dollar.
Quang of the SBV noted that the Vietnam dong has weakened by only some 2% compared to the end of 2021, which he described as suitable against market fluctuations at home and abroad. He said the economy’s forex demand has always been satisfied promptly and sufficiently.
He said the SBV would manage the forex market in a flexible manner to cushion the economy from external shocks and prevent any wild swing of the forex market to safeguard macroeconomic stability and control inflation.