Thao Nguyen and Tran Thu
The Saigon Times, Wednesday, Jan 6, 2016
HCMC - The State Bank of Vietnam (SBV) on January 4 launched the daily average inter-bank exchange rate between the Vietnam dong and the U.S. dollar and reference exchange rates between the dong and some other foreign currencies.
The move is in line with the central bank’s Decision No. 2730/QD-NHNN dated December 31, 2015, which took effect on January 4.
Based on the average inter-bank exchange rate, local banks and foreign bank branches in Vietnam that provide forex services can quote their dollar buying and selling prices on a daily basis.
This rate depends on fluctuations of the average inter-bank exchange rate, developments on world forex markets having close trade, lending, borrowing and investment ties with Vietnam and macro-economic conditions. It must be compatible with Vietnam’s monetary policy targets.
A deputy general director of a bank said this rate will depend on a basket of eight hard currencies, and on dollar supply and demand on the domestic market. Macro-economic issues like inflation and interest rates also affect the daily average inter-bank exchange rate.
According to the central bank, the new foreign exchange management mechanism enables the dong-dollar exchange rate to move in line with dollar supply and demand in Vietnam and with global market developments, and enhance the SBV’s role in executing monetary policy.
The SBV said the information of the daily average inter-bank exchange rate is to keep the forex market stable and support macro-economic stability and operations of businesses.
The central bank pledges to adopt appropriate measures and is willing to sell the U.S. dollar if needed to stabilize the forex market and keep the dong-dollar exchange rate within the permissible trading band. The trading band has been at 3% on either side since August last year.
Banks said the new management mechanism is similar to China’s.
SBV governor Nguyen Van Binh told reporters earlier that the mechanism is to discourage enterprises and residents from hoarding U.S. dollars.
The average inter-bank exchange rate on January 4 was VND21,896 per dollar. Given the dong-dollar trading band at 3%, local banks could trade the greenback in a range of VND21,239 and VND22,553.
Banks on January 4 raised their dollar buying prices by around VND40 against those on the previous trading day on December 31.
Techcombank offered the dollar buying price at VND22,430 and the ceiling price at VND22,545, up VND15 versus December 31, while ACB bought one dollar at VND22,460 and sold it at VND22,540, up VND40 and VND20 respectively.
At Vietcombank, one dollar was traded for VND22,470 for buying, up VND20 and VND22,540 for selling, unchanged from the previous trading day.
At the end of the day, buying and selling prices quoted by the three banks stayed the same.
On the informal market, the dollar was bought at VND22,640 on January 4 (up VND10) and sold at VND22,670.
A bank told the Daily that dollar demand was normal, hence the exchange rate stability. He said it will take a few days to know the market trend, which also depends on the SBV’s moves.