From today, the regulator will sell USD to intervene in the market for banks with negative foreign currency positions and want to buy, at a price of VND25,450.
This information was announced by Mr. Pham Chi Quang, Director of Monetary Policy Department on April 19. The move to sell foreign currency to intervene in the market was made by the operator in the context of the exchange rate increasing rapidly, over 5% since the beginning of the year.
According to Mr. Quang, the subjects of purchase are banks with negative foreign currency status and demand. The maximum selling level for each bank is equivalent to the threshold for them to bring their foreign currency status to balance.
"This is a very strong intervention measure, relieving market sentiment, clearing supply and ensuring smooth foreign currency liquidity," Mr. Quang affirmed.
Foreign currency status is determined based on the balance of buying and selling accounts (spot, forward, options), arising in transactions related to foreign currency.
The State Bank's intervention price today is 25,450 VND to 1 USD, equal to the listed selling rate at the State Bank Exchange. Compared to today's ceiling price of 25,473 VND, this price is 23 VND lower.
At a Government press conference in early April, Deputy Governor of the State Bank Dao Minh Tu said that by the end of last year, Vietnam's foreign exchange reserves were about 100 billion USD.
Foreign currency transactions at the counter of a commercial bank in Ho Chi Minh City. Photo: Thanh Tung
In recent days, the exchange rate has continuously broken the peak. This afternoon, Vietcombank listed the USD buying price at 25,133 VND and the selling price at 25,473 VND, equal to the prescribed ceiling. Compared to the beginning of the year, the exchange rate has increased by more than 5%.
According to Mr. Quang, the rapid increase in exchange rates is due to the international market and domestic demand. In the world, the USD index (DXY) returned to the 106-point mark for the first time in 6 months. The reason is that US inflation remains high, which may cause the US Federal Reserve (Fed) to prolong the interest rate cut period. This is contrary to investors' expectations.
Domestically, there is a large demand for foreign currency, especially from businesses, such as steel imports. Businesses that hedge against risks should increase their foreign currency futures purchases, causing future demand to shift to the present.
At the investor conference last weekend, Mr. Le Anh Tuan, Investment Director of Dragon Capital, said that the pressure on the exchange rate to increase came from the negative interest rate difference between VND and USD, fluctuations in the gold market and the rise of cryptocurrencies.
Despite the strong fluctuations, Dragon Capital's statistics still show that VND is depreciating more slowly than many currencies in the region. Since the beginning of the year, the VND's depreciation amplitude has been lower than that of Taiwan (6.4%), Thailand (7.5%), South Korea (8.3%) and Japan (9.4%).
On the management side, the State Bank said it is closely monitoring exchange rate developments to take measures to relieve pressure on the market. One of these is to neutralize the excess amount of VND in the interbank market through the issuance of treasury bills, thereby reducing pressure on the exchange rate. The amount of treasury bills issued by the State Bank by the end of last week was about VND172,000 billion.
Minh Son
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