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SBV widens exchange rate band again

Released at: 10:29, 19/08/2015

SBV widens exchange rate band again

Central bank makes second such adjustment in the last week.

by Minh Tien

On the morning of August 19 the State Bank of Vietnam (SBV) announced that the exchange rate band will increase from +/-2 percent to +/-3 percent, effective immediately.

With the interbank VND/USD exchange rate set at VND21,980, the exchange rates of commercial banks will therefore range from VND21,333 to VND22,547.

This is the second time the SBV has increased the exchange rate band in the last week, having announced it would increase from +/- 1 per cent to +/-2 per cent on the morning of August 12, effective from that day.

The exchange rate was quite stable in the first half of the year, as the SBV only adjusted the average interbank exchange rate twice, from VND21,246 to VND21,458 on January 7 and to VND21,673 on May 7.

The recent decisions of the SBV have been made amid unpredictable factors in the global economic situation, such as falling oil prices and expectations that the US Federal Reserve would adjust exchange rates due to the Greek crisis.

The most influential factor, however, has been the recent devaluations of the Chinese Renminbi, given the huge trade turnover between Vietnam and China.

As Vietnam records a substantial trade deficit with its northern neighbor, the devaluation of the Renminbi will worsen the figure even further and have a substantial impact on Vietnam’s economy. Adjustments to exchange rates and the exchange rate band by the SBV are reasonable efforts to cope with the changing circumstances.

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