US Dollar Exchange Rate Continues to Rise, Central Bank Intervention Expected
The State Bank of Vietnam (SBV) announced a 90 dong increase in the central exchange rate to 24,231 VND/USD on April 17, marking the most significant increase in recent years. With a 5% margin, commercial banks are now authorized to trade the USD at an exchange rate of 23,019 – 25,443 VND/USD.
The reference exchange rate at the SBV’s Interbank Foreign Exchange Market also increased by 94 dong, bringing the buying and selling rates to 23,400 – 25,392 VND/USD.
Continuing the upward trend from the beginning of the week, the USD exchange rate at commercial banks continues to rise.
According to a survey at 9:30 AM, Vietcombank, the bank with the largest foreign exchange transaction volume, bought and sold USD at 25,100 – 25,440 VND/USD. The buying price increased by 122 dong, while the selling price increased by 92 dong compared to the previous day. This means that the selling price of USD at Vietcombank is now only three dong below the authorized ceiling. Since the beginning of the week, Vietcombank has raised its buying price by 290 dong and its selling price by 260 dong, bringing the total increase since the beginning of the year to over 1,000 dong/USD, which corresponds to an increase of 4.2 – 4.3%.
VietinBank also increased its buying price by 122 dong and its selling price to the maximum of 25,443 VND/USD this morning. BIDV also increased its buying price by 85 dong and its selling price by 95 dong, resulting in a buying and selling range of 25,130 – 25,440 VND/USD.
Among joint-stock banks, the USD exchange rate has increased by 90 – 120 dong in both directions compared to the previous day. The selling price of USD at large private banks such as Techombank, MB, ACB, Sacombank, and Eximbank is currently between 25,420 – 25,442 VND/USD, close to the authorized ceiling.
This is the third consecutive day that banks have hiked their USD selling prices to or near the maximum allowed, despite the SBV’s repeated substantial increases in the central exchange rate and expansion of the ceiling.
With banks repeatedly raising the USD price to the permissible limit, the SBV is likely to take appropriate action, including the possibility of selling foreign exchange to intervene.
At a recent government press conference, SBV Deputy Governor Dao Minh Tu stated that the exchange rate situation is critical and that the central bank will intervene in the market if necessary.
At a consultation workshop on the report “Vietnam Financial Market 2023 and Outlook 2024” on April 16, BIDV’s Chief Economist Dr. Can Van Luc attributed the recent exchange rate fluctuations primarily to the appreciation of the USD. The USD has gained 4.5% since the beginning of the year. The US dollar has risen for two reasons: first, the Federal Reserve’s reluctance to lower interest rates; and second, the US economy’s continued recovery rather than recession. This has caused the USD to appreciate and has led to a depreciation of currencies pegged to the USD. According to Luc, the fundamental supply and demand relationship for foreign currency in Vietnam remains stable. Exchange rate pressures will ease once the Fed begins to lower interest rates, likely starting in the third quarter. He predicts that the exchange rate could rise by 2.5-3% this year.
Asked whether the SBV might intervene by selling foreign exchange, Luc believes that the central bank must consider the matter carefully to avoid disrupting gold imports. They must also determine how much to import to prevent depleting foreign exchange reserves. If the foreign exchange market fluctuates significantly, the SBV will be prepared to intervene using various resources. “I believe the SBV has the expertise to manage this situation. For example, issuing certificates of deposit is an effective means of raising interbank interest rates to reduce the USD-VND interest rate differential and alleviate exchange rate pressures,” Luc said.
