The Dollar’s Ascent: A Clear and Persistent Rise

In its market report released on June 26th, ACB’s Financial Markets Block stated that the USD/VND exchange rate on the interbank market slightly increased on June 25th and continued to closely follow the ceiling rate effective on Tuesday at 25,466 VND/USD.

The analysis team assessed that the demand for foreign currencies in the market surged at the end of June, along with the psychological effect of the US dollar’s appreciation in the global market, causing the exchange rate to maintain a clearer upward trend after relative stability in the previous two weeks.

To stabilize the exchange rate, according to market sources, the SBV had to sell a large amount of foreign currency to intervene.

Previously, from April 19th, in the context of continuously rising exchange rates, the SBV announced foreign currency sales intervention to stabilize the market. According to Mr. Pham Chi Quang, Director of the Monetary Policy Department, this is a very strong measure taken by the SBV to ensure market psychology relief, market supply guarantee, smooth foreign currency supply, and meet the legal foreign currency needs of the economy.

Looking back, the most recent SBV foreign currency sales intervention occurred in the second quarter of 2022 to stabilize the foreign exchange market after the Fed continuously raised interest rates, putting depreciation pressure on the VND. However, due to the persistent exchange rate pressure, the SBV switched from forward contracts to spot contracts in mid-July 2022 and increased the selling price by 150 VND, even though it had already increased by 200 VND in mid-May 2022.

According to analysts’ statistics, in the first nine months of 2022, with a focus on the third quarter, the amount of foreign currency the SBV used for market intervention exceeded 20 billion USD, equivalent to more than 20% of total foreign exchange reserves at the end of 2021.