Vietnam to speed up foreign currency selling
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The State Bank of Vietnam is set to increase the frequency of currency selling amid rising U.S. interest rates, which have strengthened the greenback.
With a foreign exchange reserve of over $100 billion, the central bank will continue to sell its foreign currency to stabilize the market, Pham Chi Quang, deputy head of the bank’s currency policy department, said Monday.
“The State Bank of Vietnam will increase its sale of foreign currency to increase market supply.”
The central bank’s decision came after the U.S. Federal Reserve on May 16 increased its interest rate by 0.75 percentage point, the biggest increase in 28 years and the third time this year.
The increases boosted the U.S. Dollar Index, which measures the value of the greenback against a basket of foreign currencies, by 10 percent compared to the start of the year.
But Quang said the Vietnamese dong had only weakened against the U.S. dollar by around 2 percent so far this year, which shows the dong is stable.
Demand for foreign currency is met on time, especially for businesses who need to import essential items amid rising energy and commodity prices, he added.
The State Bank will continue to manage the currency exchange rate with flexibility to absorb external shocks, help stabilize the macro economy and control inflation.
Questions & Answers
Q.Why is the State Bank of Vietnam planning to increase the frequency of foreign currency selling?
Why is the State Bank of Vietnam planning to increase the frequency of foreign currency selling?
The State Bank of Vietnam plans to sell more foreign currency due to rising U.S. Interest rates. These rate increases have strengthened the U.S. Dollar, prompting the central bank to intervene to stabilise the market and increase currency supply.
Q.How much have U.S. Interest rates risen, and what impact has this had on the U.S. Dollar Index?
How much have U.S. Interest rates risen, and what impact has this had on the U.S. Dollar Index?
The U.S. Federal Reserve increased its interest rate by 0.75 percentage points, the largest rise in 28 years. This is the third increase this year and has boosted the U.S. Dollar Index by 10 percent compared to the start of the year.
Q.Despite the strengthening U.S. Dollar, how has the Vietnamese dong performed this year?
Despite the strengthening U.S. Dollar, how has the Vietnamese dong performed this year?
Pham Chi Quang stated the Vietnamese dong has only weakened against the U.S. Dollar by approximately 2 percent so far this year. This performance indicates the dong has remained stable despite external pressures.