As global financial fluctuations have put significant pressure on the monetary market this year, the State Bank of Việt Nam has adopted a flexible and proactive monetary policy to maintain stability. Director of the Monetary Policy Department Phạm Chí Quang spoke about developments in the foreign exchange market and measures to ensure system liquidity.
Phạm Chí Quang, Director of the Monetary Policy Department under the State Bank of Việt Nam.
As global financial fluctuations have put significant pressure on the monetary market this year, the State Bank of Việt Nam has adopted a flexible and proactive monetary policy to maintain stability. Director of the Monetary Policy Department Phạm Chí Quang spoke about developments in the foreign exchange market and measures to ensure system liquidity.
How do you assess the development of the foreign exchange market this year?
The foreign exchange market and the exchange rate have been under significant pressure since the beginning of this year due to complicated and unpredictable developments in the international market. These include uncertainties surrounding the US Federal Reserve’s monetary policy, changes in the US trade and tariff policies and fluctuations of the US dollar in the global market. At some points in time, domestic foreign currency supply and demand faced temporary pressure from short-term factors.
Against this backdrop, the State Bank of Việt Nam has managed the exchange rate flexibly and proactively, aligning with market conditions to help absorb external shocks.
In addition, the State Bank has harmoniously combined monetary policies, including interest rates and Vietnamese đồng liquidity, with foreign exchange intervention through sales to stabilise the foreign exchange market and the exchange rate. These measures have helped support macroeconomic stability and control inflation.
As a result, the USD/VND exchange rate has risen by around 3.5 per cent as of early December compared to the end of 2024 and the foreign exchange market operates smoothly.
What are your forecasts for the exchange rate’s development and the policy orientations?
As mentioned, the foreign exchange market and the exchange rate faced significant pressure in certain periods due to external factors and short-term market fluctuations. However, these pressures have shown signs of easing recently with positive trade activities.
The foreign currency supply and demand conditions in the medium and long term are expected to be supported by stable macroeconomic fundamentals, which will create a more favourable environment for a more stable exchange rate environment.
The State Bank of Việt Nam will continue to closely watch domestic and international developments and flexibly coordinate monetary and exchange rate policies while standing ready to intervene in the foreign exchange market when necessary to ensure smooth operations and contribute to ensuring macroeconomic stability and inflation control.
The liquidity of Vietnamese đồng in the interbank market has come under strain despite the State Bank’s support through open market operations. What measures are being taken to address this situation?
In the context of multi-dimensional pressures, the State Bank of Việt Nam has operated monetary policy tools flexibly to regulate the liquidity of Vietnamese đồng, which also supports market liquidity, stabilises the monetary market and facilitates credit supply to the economy.
Recently, some credit institutions have had higher liquidity demand. To meet liquidity demand, especially for the year-end peak period, in addition to providing funds through open market operations, the State Bank has also implemented foreign exchange swap transactions with credit institutions to help stabilise the monetary market.
The State Bank will closely monitor market conditions and proactively adjust liquidity using appropriate tools, timing, and scale, with the aim of supporting exchange rate stability and maintaining overall macroeconomic stability. — VNS
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