THE State Bank of Vietnam (SBV) signalled that it’s ready to defend the dong after the currency slipped to a record low amid bouts of US dollar strength.
The central bank will continue monitoring the dong’s exchange rate amid currency fluctuations in the global market, SBV governor Nguyen Thi Hong told the parliament on Wednesday (May 29).
She said the central bank sees a possible reduction in demand for US dollars as companies have increased forward purchases of the greenback. The monetary authority also expects the dong to strengthen by the end of this year when the US Federal Reserve could begin cutting rates.
The currency’s depreciation has been driven by global uncertainties, including a delay in the anticipated easing by the Fed. Imports growth outpacing exports has also contributed to the demand for US dollars, a situation that will be fixed when the trend reverses.
The Vietnamese dong fell to a record low of 25,477 per US dollar last week and emerged as among Asia’s worst performers this month. The central bank last month sold US dollars at the “intervening price” of 25,450 dong per US dollar.
The SBV had last week said it will manage the exchange rate flexibly and in accordance with market developments through monetary policy tools. The authority had then raised the reverse repurchase rate to 4.5 per cent, delivering its second quarter-point hike in a month in moves seen as efforts to stabilise the dong.
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The actions are fuelling bets that the SBV may resort to tightening the benchmark interest rates soon. BLOOMBERG
