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SBV did not devaluate the local currency
Governor of the State Bank of Vietnam Nguyen Van Giau talks about the latest exchange rate adjustment and monetary policy pursued by the State Bank.
Could you please tell us the reasons for the VND/US$ exchange rate adjustment?
In order to more truly reflect foreign currency supply and demand on the market, and in order to stop speculation, the State Bank decided to raise the interbank exchange rate from VND16,139/US$1 applied for June 10 to VND16,461/US$1 for June 11. The forex trading band remains at +/-1%, which means that credit institutions can quote prices of between VND16,296-16,626/US$1. The State Bank will continue intervening in the market in order to ensure the market’s liquidity.
Prime Minister Nguyen Tan Dung in a meeting with JP Morgan Chase’s Chief Economist David Fernandez affirmed that Vietnam would not devaluate the local currency. Can the latest exchange rate adjustment be understood as an action to devaluate the VND?
The exchange rate adjustment is a normal activity of the State Bank of Vietnam to regulate the foreign currency market, and should not be seen as an action of devaluating the VND. I reported to the Prime Minister and talked with him about the issue.
In fact, exchange rate adjustments occurred many times in the past. With the previous adjustments, the VND price just decreased by VND10-15/US$1, while the latest adjustment saw the bigger price increase of the dollar, which was the reason that people feared a sharp devaluation.
Do you think that the move will make people lose confidence in the local currency?
No, I don’t think so. Exchange rate ups and downs are seen in any market economy. Other countries even apply the policy on floating exchange rates. Of course, Vietnam does not.
One of the problems now is the decrease in people’s confidence in a better prospect for the national economy, which explains why people have been rushing to buy dollars. What would you say about this?
I can say that the worries of some people have been eased considerably since the government’s implementation of its package of solutions to fight inflation.
Chief Economist of JP Morgan Chase David Fernandez gave a faithful assessment about Vietnam’s economy. The World Bank’s Vice President James Adams in a meeting with Prime Minister Nguyen Tan Dung on June 3 also highly applauded Vietnam’s policy on curbing inflation and ensuring macroeconomic stability.
VNN
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