If the exchange rate is not flexible enough, it will be difficult for imports and exports to compete

VCN - According to experts, the State Bank's decision to adjust the spot exchange rate band between USD and VND from ±3% to ±5% is consistent with the goal of stabilizing the foreign exchange market and controlling inflation.
The SBV has applied many measures to stabilize the exchange rate. Source: Internet.
The SBV has applied many measures to stabilize the exchange rate. Source: Internet.

The exchange rate has increased by 7% since the beginning of the year

On October 17, the SBV decided to adjust the exchange rate band to ±5%, thereby widening the gap between the floor exchange rate and the ceiling rate listed at commercial banks.

This movement has led to a sharp increase in buying and selling rates at commercial banks compared to the last session of last week.

Accordingly, the central exchange rate announced by the SBV on October 18 was at 23,637 VND/USD, up to 51 VND compared to October 17. With a margin of ±5% being applied, the ceiling rate applied by banks is 24,818 VND/USD and the floor rate is 22,455 VND/USD.

At commercial banks, the exchange rate is listed around 24,130-24,230 VND/USD on the buying side, 24,190-24,500 VND/USD on the selling side. This price has increased by about 200-300 VND per USD in both buying and selling directions compared to the 14/10 session.

Thus, the exchange rate at commercial banks has exceeded 24,000 VND/USD, the exchange rate on the free market has also exceeded 24,500 VND/USD, resulting in the USD exchange rate at commercial banks increasing by 6-7%.

However, before the SBV decided to increase the exchange rate band, the exchange rate between VND and USD was under a lot of pressure when the SBV implemented liquidity injection measures at a ceiling rate of 3% compared to the central rate. According to the money market report, bonds of SSI Securities Company, the interbank exchange rate increased beyond 24,000 VND/USD, much higher than the selling rate at the SBV's Exchange and the State Bank had to continue intervention through the sale of foreign currency from the foreign exchange reserve, but to a relatively limited extent.

Therefore, experts all said that it is necessary for the SBV to widen the spot exchange rate band between USD and VND to 5% for the first time in nearly 10 years, in order to accommodate strong and continuously increasing fluctuations of the USD/VND exchange rate.

Increase competitiveness for import and export

Economic expert Assoc.Prof.Dr. Dinh Trong Thinh (Academy of Finance) said that high inflation has caused many central banks around the world to raise interest rates and raise the value of currencies to fight inflation.

In particular, the US Federal Reserve (Fed) has raised interest rates 5 times since the beginning of the year with a total increase of 3%, causing the USD index to reach the peak of more than 20 years, sometimes surpassing the level of 114 points in recent times. However, in the context of many currencies depreciating strongly, the pressure on VND is very great, but thanks to the stabilization of the macroeconomy and inflation, the VND depreciates relatively little against the USD and remains the most stable compared to the USD.

According to Mr. Thinh, in order to stabilize the foreign exchange market, the SBV used many measures such as selling USD interventions and raising the operating interest rate but at a slight margin of only 1%. Therefore, the expansion of the exchange rate band by the State Bank to keep the exchange rate stable and create conditions for commercial banks to buy and sell USD at a new price range, reducing the difference with the free market, thereby reducing the demand for USD.

Similarly, economist Dr. Le Xuan Nghia also said that it is difficult for the State Bank to adjust the value of the currency. In order to limit the sale of foreign currencies to the market, it is necessary to balance supply and demand. Moreover, under pressure from the current account, although our country's trade balance is still in relative surplus, the balance of services has a large deficit, so the State Bank is forced to apply the central exchange rate adjustment.

“Managing the financial and monetary markets is a matter of controlling interest rates and exchange rates. Increasing interest rates or widening the exchange rate band must consider the reality from the market, to adjust accordingly,” Assoc.Prof.Dr. Dinh Trong Thinh said.

However, with the sharp increase of the exchange rate as above, there will be some impact on import and export activities. In theory, an increase in the exchange rate will benefit exporters and negatively affect importers. Moreover, businesses that borrow capital in foreign currencies will also be affected when interest expenses and exchange rate losses may increase.

But according to businesses, compared to many countries, the exchange rate in Vietnam has low volatility in the region, the whole country still maintains a trade surplus, so the expansion of the exchange rate band and exchange rate movements is not too big of an impact right now.

According to Dr. Vo Tri Thanh, Director of the Institute for Brand Strategy and Competition, the devaluation of the dong will have certain effects on the economy, especially inflation and interest rates. With exports, if the exchange rate is not flexible enough, it is also difficult to compete, Vietnam's exports rely heavily on imports, so if the VND depreciates a lot, exports will not necessarily benefit.

Therefore, the current monetary policy management is based on calculations that affect many aspects of inflation, interest rates, import and export, etc., insofar as the relative macro stability is maintained, supporting exports without having too negative an impact on imports and inflation.

With the above issues, the SBV has also repeatedly affirmed that it will continue to closely monitor market developments, coordinate monetary policy tools, and be ready to sell foreign currency interventions to stabilize the market.

By Huong Diu/ Huu Tuc

Related News

Exchange rate risks need attention in near future

Exchange rate risks need attention in near future

VCN - Exchange rate developments in 2025 are considered to be quite complicated due to US policies related to trade and investment.
Flexible and proactive when exchange rates still fluctuate in 2025

Flexible and proactive when exchange rates still fluctuate in 2025

VCN - In the last days of 2024, as many forecasts, the US Federal Reserve (Fed) continued to cut interest rates, pushing the USD index up, creating pressure on domestic exchange rates. Therefore, domestic exchange rate management policies need to continue to be flexible and appropriate, thereby supporting businesses in import and export.
Credit continues to increase at the end of the year, room is loosened to avoid "surplus in some places - shortage in others"

Credit continues to increase at the end of the year, room is loosened to avoid "surplus in some places - shortage in others"

VCN - Credit demand continues to increase at the end of the year, thereby helping banks compete through continuing to adjust interest rates appropriately.
Bad debt at banks continues to rise in both amount and ratio

Bad debt at banks continues to rise in both amount and ratio

VCN - After nine months of 2024, bad debt balances at banks continue to rise, potentially posing risks to the banking sector if control measures aren't implemented.

Latest News

Embracing green exports: a pathway to enter global supply chains

Embracing green exports: a pathway to enter global supply chains

This shift presents both a challenge and an opportunity for Vietnamese businesses to innovate and enhance their competitive edge in the international arena.
New policy proposed to prevent transfer pricing, tax evasion of FDI enterprises

New policy proposed to prevent transfer pricing, tax evasion of FDI enterprises

The ministry proposes to issue a decree on the establishment, management and use of the Investment Support Fund to stabilise the investment environment, encourage and attract strategic investors and multinational corporations.
Việt Nam’s durian exports to China plummet by 80%

Việt Nam’s durian exports to China plummet by 80%

This sharp decline has had a direct impact on Việt Nam’s fruit and vegetable export revenue, which stood at US$416 million in January 2025, marking a 11.3 per cent decrease month-on-month and a 5.2 per cent drop year-on-year.
Coconut exports reach 14-year high

Coconut exports reach 14-year high

In 2024, fresh coconut and coconut product exports surpassed US$1 billion, marking the highest figure in the past 14 years.

More News

Shrimp exports grow in the first month of 2025

Shrimp exports grow in the first month of 2025

According to data from the Việt Nam Association of Seafood Exporters and Producers (VASEP), shrimp products recorded a 13 per cent increase in export value in January 2025, reaching a total of $273.3 million.
Rice export prices drop, but decline expected to be short-term

Rice export prices drop, but decline expected to be short-term

Việt Nam’s rice export prices have declined, reaching their lowest level in three years.
Key agro products expected to maintain export growth this year

Key agro products expected to maintain export growth this year

At present, agricultural exports, such as rice, coffee and seafood, have steadily secured a stable place in major global markets.
EU issues 12 warnings against Việt Nam’s food and agricultural exports

EU issues 12 warnings against Việt Nam’s food and agricultural exports

The Việt Nam SPS Office has reported that some Vietnamese export products failed to meet the EU’s stringent standards.
Việt Nam to impose VAT on low-value express-imported goods

Việt Nam to impose VAT on low-value express-imported goods

Việt Nam will end a previous policy that exempted imported goods valued under VNĐ1 million (US$39.4) from taxes when shipped via express delivery.
Vietnam kicked off the year with a strong start in trade, exceeding US$63 billion in the first month

Vietnam kicked off the year with a strong start in trade, exceeding US$63 billion in the first month

VCN - Data from the General Department of Vietnam Customs indicates a softening of both exports and imports in January 2025, relative to the same month in 2024.
Import and export turnover reaches about US$29 billion in the second half of January 2025

Import and export turnover reaches about US$29 billion in the second half of January 2025

VCN - Vietnam's total import and export turnover in the second half of January 2025 (January 16-31, 2025) reached US$28.9 billion, the latest preliminary statistics of the General Department of Vietnam Customs reported.
Market edges up slightly as liquidity remains low

Market edges up slightly as liquidity remains low

Market breadth remained positive, with 161 gainers outnumbering 144 decliners.
Business regulations must be trimmed for development of enterprises: Experts

Business regulations must be trimmed for development of enterprises: Experts

The General Statistics Office (GSO)'s socio-economic report for January 2025 reveals that while over 33,400 newly established or resumed businesses entered the market - marking a 15% increase compared to January 2024 - more than 58,300 businesses withdrew from the market, representing a growth of 8.1% on year.
Read More

Your care

Latest Most read
Embracing green exports: a pathway to enter global supply chains

Embracing green exports: a pathway to enter global supply chains

This shift presents both a challenge and an opportunity for Vietnamese businesses to innovate and enhance their competitive edge in the international arena.
New policy proposed to prevent transfer pricing, tax evasion of FDI enterprises

New policy proposed to prevent transfer pricing, tax evasion of FDI enterprises

The ministry proposes to issue a decree on the establishment, management and use of the Investment Support Fund to stabilise the investment environment, encourage and attract strategic investors and multinational corporations.
Việt Nam’s durian exports to China plummet by 80%

Việt Nam’s durian exports to China plummet by 80%

This sharp decline has had a direct impact on Việt Nam’s fruit and vegetable export revenue, which stood at US$416 million in January 2025, marking a 11.3 per cent decrease month-on-month and a 5.2 per cent drop year-on-year.
Coconut exports reach 14-year high

Coconut exports reach 14-year high

In 2024, fresh coconut and coconut product exports surpassed US$1 billion, marking the highest figure in the past 14 years.
Shrimp exports grow in the first month of 2025

Shrimp exports grow in the first month of 2025

According to data from the Việt Nam Association of Seafood Exporters and Producers (VASEP), shrimp products recorded a 13 per cent increase in export value in January 2025, reaching a total of $273.3 million.
Mobile Version