The State Bank of Vietnam (SBV) announced on August 24 to take all possible measures to stabilize the exchange rate between the domestic dong currency and the U.S. dollar from now to early next year.
In a statement issued on August 24, Nguyen Thi Hong, deputy governor of the central bank, said with the dong/dollar trading band revised up from 1% to 3% and the reference exchange rate by 1%, the greenback had sharply appreciated against the dong.
The SBV had taken into account all key market factors, including the Chinese yuan devaluation and the U.S. Federal Reserve’s possible future rate spike, before it made those foreign exchange policy changes.
The adjustments have created sufficient room for the dong to respond to unexpected market developments. Hong ascribed psychological factors and speculative rumors to recent exchange rate volatility.
Therefore, the central bank would not revise the exchange rate to ensure forex market stability from now to the end of this year and early next year.
The central bank statement came out as the U.S. dollar on August 24 rose to the upper limit allowed by the SBV. The dollar has been strengthening against the Vietnam dong since August 19.
Local banks including Vietcombank, Eximbank, VietinBank and Techcombank revised up the dollar selling price to VND22,547 a dollar at noon while quoting the buying price at VND22,500 to VND22,510 a dollar.
With the dong/dollar trading band expanded to 3% and the reference exchange rate raised by 1% last week, local banks can trade the dong in the range of VND21,233 and VND22,547 per dollar.
On the informal market, some currency changers in HCMC adjusted down buying and selling prices compared to last week. A money changer in the central business district bought a dollar at VND22,580 and sold it at VND22,660, lower than last week’s VND22,630 and VND22,730 a dollar respectively.
According to a banker, dollar supply had been normal until last Friday before it turned tight on August 24 morning. Global stock markets continued crashing.
However, tension was not too critical as most banks still reported slightly positive foreign exchange holding positions, the banker said.
Psychological factors were to blame. Earlier, banks’ foreign exchange holdings were negative as they sold foreign currencies to clients but now they want to stay slightly positive.
If customers ask to buy foreign currencies, banks will have to buy dollars on the inter-bank market or seek supplies from foreign direct investment (FDI) enterprises.
If the SBV boosts intervention by selling dollars at VND22,475 each to banks, the situation would ease, the banker said.
The banker said some foreign banks increased U.S. dollar purchases on August 24 morning, thus pushing up dollar demand.
Some foreign investors offloaded shares to take money back amid global stock market falls and investor caution. Therefore, the dollar got firmer quickly, he explained.
Saigon Jewelry Company (SJC) quoted the gold selling price at VND35.25 million per tael, down VND50,000 against late last week, and adjusted up its buying price by VND100,000 to VND34.7 million a tael.
In the afternoon, the enterprise slightly raised its gold selling price to VND35.3 million per tael. The selling and buying price differential was around VND600,000 a tael, a sharp slide compared to the VND1 million last week.