The State Bank of Vietnam (SBV) stands ready to sell foreign currencies in case of high demand in the market.

Deputy head of the SBV’s Monetary Policy Department Pham Chi Quang. Source: SBV

Deputy head of the SBV’s Monetary Policy Department Pham Chi Quang told the local media, saying this would help ensure banks and credit institutions have the means to meet the demand for foreign currencies from individuals and organizations.

"The SBV will manage foreign exchange policy in a flexible manner to prevent it from getting out of control, seen as key steps to stabilize foreign exchange market, macroeconomic conditions and contain inflation," Quang said.

According to the SBV’s representative, the global financial market is going through a volatile phase given the current conflict between Russia-Ukraine.

"Geopolitical tension is causing price surges for energy and strategic commodities, while agravating the already severe impacts from the disruption of global supply chains. Against this backdrop, central banks around the world have tightened monetary policies to contain high inflationary pressure," he added.

In the latest movement, the United States Federal Reserve (Fed) raised its policy rates by 0.75%, the highest in the last 28 years, and experts do not rule out a new increase in rates in the coming months. 

Quang noted the situation prompted the US dollar index, or DXY, to rise by 10% against early 2022, causing the depreciation of currencies around the world.

“This resulted in an imbalance of the supply-demand of foreign currencies and eventually affected market sentiment. The SBV, therefore, is under pressure to stabilize the foreign exchange rate,” he said.

Quang, however, noted that the Vietnamese dong (VND) has seen a mild depreciation of around 2% against the US dollar as of present.

“Vietnam’s foreign exchange market continues to operate as normal as any legal demand for foreign currencies is met promptly, especially for local traders to import essential goods,” Quang said.

Since early 2022, the SBV has sold foreign currencies multiple times to ensure sufficient supplies on the market and maintain abundant liquidity of the VND to keep a stable interest-rate environment.

Quang said that a 2% increase in the USD/VND exchange rate currently is in line with the market situation and the central bank’s objectives in stabilizing macro-economic conditions.

Given a foreign exchange reserves of around US$100 billion or fan equivalent of 3.1 months of  imports, Quang said the SBV is capable of meeting market demands for foreign currencies, in turn contributing to market stabilization and aiding economic recovery.

Unofficial data from Viet Dragon Securities Company and SSI Corporation revealed the SBV sold foreign currencies worth US$7 billion to the market in the first five months of 2022. The figure remained significant as last year, the SBV bought in an estimated $13 billion to build up foreign reserves.