The US dollar has appreciated significantly against the dong in the past few days in the wake of the US Federal Reserves (Fed)’s interest rate hike last week, but local officials and experts are not too worried, believing these hikes won’t affect Vietnam’s economy in any major way.
Last Thursday, Fed decided to raise the benchmark interest rate by 0.25 percentage points while implying that from now till the end of the year, the rate could be raised two more times.
The move caused immediate impacts on the domestic market with the dollar appreciating significantly against the dong in both official and unofficial markets.
Yesterday, the central bank listed the daily reference exchange rate at VND22,617 per dollar, up VND15 from the previous day. With the current trading band of +/-3 per cent, the ceiling rate applied to commercial banks during the day is VND23,295 per dollar and the floor rate VND21,941 per dollar.
The $/VND exchange rate quoted by all commercial banks also went up yesterday.
Vietcombank raised the rate by VND10, listing the buying rate at VND22,810 per dollar and the selling rate at VND22,880. Compared with the end of last week, the dollar listed at Vietcombank rose by VND45.
The rate at BIDV was also up VND10, standing at VND22,815 for buying and VND22,885 for selling.
The same move was seen at Techcombank, which added VND15 to buy the greenback at VND22,790 and sell at VND22,890.
Despite the appreciation, the State Bank of Vietnam (SBV) said that the dollar demand and supply sources remained stable in the past days and banks had met all dollar demands of institutions and individuals.
The central bank continued net purchase of the greenback to build up the national foreign reserves, SBV said.
Nguyen Hoang Minh, deputy director of SBV’s HCM City branch, said that SBV was closely monitoring the exchange rate to timely take measures.
Commercial banks also said that the dollar had appreciated by just 0.8 per cent against the dong to date this year, meaning the current rise not yet a concern.
Can Van Luc, chief economist of the Bank for Investment and Development of Vietnam, was not also concerned about the depreciation of the dong against the dollar thanks to the country’s balance in dollar supply and demands while the central bank is still applying a flexible and effective exchange rate policy.
Besides this, the record high of the nation’s foreign reserves of $63 billion would also support the central bank to fight against external shocks to stabilise the exchange rate, Luc said.
According to the Viet Dragon Securities Company, the devaluation of the dong against the dollar is still under the central bank’s control, predicting that the dollar could appreciate by 1.5-2 per cent this year.
However, experts also suggested the central bank be cautious as besides the Fed interest hike, rising inflation and the return of a trade deficit in May in the domestic market have also put pressure on the exchange rate.
Banking expert Nguyen Tri Hieu forecast that inflation this year could exceed the threshold of 4 per cent, but he believed it was acceptable for the rate to be ranged between 4 and 4.5 per cent as long as the country’s GDP growth reaching 6.8 per cent. “It does still need an alarm though,” he said.
In its latest report, the National Financial Supervisory Committee stresses that the dollar is forecast to be on an uptrend from now to the end of the year, especially while the Fed plans to continuously increase interest rate, so the central bank needs to closely watch the move of the greenback to timely make flexible adjustments.
Exports benefit, imports suffer
Despite an impact on the exchange rate, experts said that the appreciation of the dollar against the dong would also benefit Vietnam’s exports.
“Local exporters receive payment in US dollars, so the appreciation of the greenback will help them make more profit,” Hieu said.
Do Ha Nam, chair of Intimex Group, one of Vietnam’s major agriculture produce exporters, said that the dollar appreciation would be advantageous for exporting countries, especially for Vietnam that has often had a trade surplus in recent years.
The depreciation of the dong by 2-3 per cent in recent years had encouraged domestic exporters and also helped the economy operate more stably, Nam said, adding however, that if the dong depreciated more than 3 per cent, it would cause risks for firms that have borrowed a large amount of dollars.
As for imports, Hieu said, high dollar prices would create difficulties for Vietnamese import businesses, however, each sector would see a different impact.
Vu Duy Hai, general director of Vinacam, which specialises in fertiliser imports, said that the dollar appreciation would cause an increase in input costs for local producers and farmers, especially for products that Vietnam cannot produce, such as kalium fertiliser.
As there remains an amount of fertiliser in stockpile, Nam said that the dollar price hike would cause selling prices of fertiliser to increase in the third or early fourth quarter this year.
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