Illustrative photo (Source: cafef.vn)Hanoi (VNS/VNA) – The US dollar has appreciatedsignificantly against the Vietnamese dong in the past few days in the wakeof the US Federal Reserves (Fed)’s interest rate hike last week, but localofficials and experts are not too worried, believing these hikes won’taffect Vietnam’s economy in any major way.
On June 14, Fed decided to raise the benchmark interestrate by 0.25 percentage points while implying that from now till the end of theyear, the rate could be raised two more times.
The move caused immediate impacts on the domestic market withthe dollar appreciating significantly against the dong in both official andunofficial markets.
On June 20, the central bank listed the daily referenceexchange rate at 22,617 VND per USD, up 15 VND from the previous day. Withthe current trading band of /-3 percent, the ceiling rate applied tocommercial banks during the day is 23,295 VND per USD and the floor rate 21,941VND per USD.
The VND/USD exchange rate quoted by all commercial banksalso went up on June 20.
Vietcombank raised the rate by 10 VND, listing the buyingrate at 22,810 VND per USD and the selling rate at 22,880 VND. Comparedwith the end of last week, the USD listed at Vietcombank rose by 45 VND.
The rate at BIDV was also up 10 VND, standing at 22,815 VND forbuying and 22,885 VND for selling.
The same move was seen at Techcombank, which added 15 VND tobuy the greenback at 22,790 VND and sell at 22,890 VND.
Despite the appreciation, the State Bank of Vietnam (SBV)said that the dollar demand and supply sources remained stable in the past daysand banks had met all dollar demands of institutions and individuals.
The central bank continued net purchase of the greenbackto build up the national foreign reserves, SBV said.
Nguyen Hoang Minh, deputy director ofSBV’s HCM City branch, said that SBV was closely monitoring theexchange rate to timely take measures.
Commercial banks also said that the dollar had appreciated byjust 0.8 percent against the dong to date this year, meaning the currentrise not yet a concern.
Can Van Luc, chief economist of the Bank for Investment andDevelopment of Vietnam, was not also concerned about the depreciation ofthe dong against the dollar thanks to the country’s balance in dollarsupply and demands while the central bank is still applying a flexible andeffective exchange rate policy.
Besides this, the record high of the nation’s foreignreserves of 63 billion USD would also support the central bank to fight againstexternal shocks to stabilise the exchange rate, Luc said.
According to the Viet Dragon Securities Company, thedevaluation of the dong against the dollar is still under the centralbank’s control, predicting that the dollar could appreciate by 1.5-2 percentthis year.
However, experts also suggested the central bank be cautiousas besides the Fed interest hike, rising inflation and the return of a tradedeficit in May in the domestic market have also put pressure on the exchangerate.
Banking expert Nguyen Tri Hieu forecast that inflation thisyear could exceed the threshold of 4 percent, but he believed it was acceptablefor the rate to be ranged between 4 and 4.5 percent as long as the country’sGDP growth reaching 6.8 percent. "It does still need an alarmthough," he said.
In its latest report, the National Financial SupervisoryCommittee stresses that the dollar is forecast to be on an uptrend from now tothe year-end, especially while the Fed plans to continuously increaseinterest rate, so the central bank needs to closely watch the move of thegreenback to timely make flexible adjustments.
Despite an impact on the exchange rate, experts said that theappreciation of the dollar against the dong would also benefit Vietnam’sexports.
"Local exporters receive payment in US dollars, so the appreciation of thegreenback will help them make more profit," Hieu said.
Do Ha Nam, Chairman of Intimex Group, one of Vietnam’smajor agriculture produce exporters, said that the dollar appreciation would beadvantageous for exporting countries, especially for Vietnam that has often hada trade surplus in recent years.
The depreciation of the dong by 2-3 percent in recentyears had encouraged domestic exporters and also helped the economy operatemore stably, Nam said, adding however, that if the dong depreciatedmore than 3 percent, it would cause risks for firms that have borrowed a largeamount of dollars.
As for imports, Hieu said, high dollar prices would createdifficulties for Vietnamese import businesses, however, each sector wouldsee a different impact.
Vu Duy Hai, general director of Vinacam, which specialises infertiliser imports, said that the dollar appreciation would cause an increasein input costs for local producers and farmers, especially for products that Vietnamcannot produce, such as kalium fertiliser.
As there remains an amount of fertiliser instockpile, Nam said that the dollar price hike would cause sellingprices of fertiliser to increase in the third or early fourth quarter thisyear.-VNS/VNA
VNA
