Vietnam c.bank raises USD prices in face of Chinese yuan depreciation: BVSC
The State Bank of Vietnam (SBV) has achieved its goal of stabilizing the market with the sale of forex, stated Bao Viet Securities Company (BVSC).
The SBV's decision to increase the USD selling price by nearly 1% may be influenced by the Chinese yuan (CNY)'s potential depreciation of an additional 1% - 2%, according to BVSC's report released on July 23.
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Moreover, it came after the banking system's foreign exchange balance returning to positive, indicating that commercial banks' demand for foreign currency is no longer significant.
As a result, the SBV has achieved its goal of stabilizing the market, according to BVSC.
On July 23, the SBV increased the USD prices by VND223 or 0.9% to VND23,273 from the previous of 23,050, after quoting the selling price of the greenback lower than that of the market three weeks ago.
Following the move, the USD/VND exchange rate quoted by commercial banks, was promptly raised compared to early in the day. For example, the USD selling price at Vietcombank increased by 0.7% to VND23,260 and Sacombank to VND23,300.
According to the report, commercial banks' simultaneous increases in USD prices in tandem with that of the SBV were more of an instant psychological response than an impact from the actual demand/supply balance on the market.
Nevertheless, the SBV's decision to stop selling USD at low price leads to a higher USD/VND exchange rate. If the rate does not return to normal after an increase recorded in July 23, VND will be devalued by 2% compared to the end of 2017.
BVSC stated the SBV's goal is to take the USD selling price back to the market value, especially when the People's Bank of China (PBOC) has not intervened to halt the free fall of the CNY in recent days.
In case of the CNY being devalued for an additional of 1% - 2%, VND's depreciation will be in range of 2% - 3% for 2018, instead of BVSC's previous prediction of 2%.
Over the last week, the State Bank of Vietnam (SBV) has sold nearly US$2 billion at soft prices to commercial banks in order to increase supply in the foreign exchange market and stabilize the USD/VND exchange rate.
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