Exchange rate won’t fluctuate strongly

	Exchange rates under less pressure, no sharp fluctuations
	Enterprises warned against exchange rate risks
	Enterprises expresses “peace of mind” in exchange rate waves

The exchange rate will not fluctuate strongly despite great pressure. Photo: ST

Under a lot of pressure

In the middle of May, the foreign currency market became very unstable in the face of strong and continuous changes in the exchange rate between USD and VND at commercial banks. At that time, the USD / VND exchange rate surged to nearly 1% within 5 weeks since the end of April, peaking at 23,360 VND / USD. However, the VND had a strong recovery in June and the first half of July when the USD / VND exchange rate continued to decline, down more than 0.4%. The fact is that compared to previous years, the changes in the exchange rate has been lower and lower, although the State Bank is not anchoring the rise of the exchange rate to a certain extent. Specifically, the exchange rate in the fourth quarter of 2018 increased by 1.8%, the first quarter of 2019 increased by 1%, but the second quarter of 2019 only increased by 0.3-0.4%.

According to experts, the cause of exchange rate fluctuations is only "temporary", fluctuating in accordance with the movements of the USD due to the strong fluctuations of key currencies such as Yuan (CNY) and Japanese Yen (JPY) in the world market, concerns about the US-China trade conflict and CNY's continuous depreciation since the end of May. But the exchange rate is showing signs of decreasing recently in commercial banks due to the expectation of lower interest rates from the US Federal Reserve (Fed).

Evaluating exchange rate movements, SBV leaders said that fluctuations in the international and regional markets in the first 6 months are very difficult to predict. However, the SBV has actively taken measures to stabilize the foreign exchange markets; the exchange rate was adjusted at a very good level. All economic foreign currency needs are fully met.

Related to this issue, economist Dr. Can Van Luc judged that the exchange rate was more stable than before. With the flexible and proactive mechanism and experience of operating exchange rates, together with the synchronous use of various instruments of the State Bank and foreign exchange resources have been strengthened, the supply and demand relationship of foreign currency has been stable. According to the report of the Institute of Economic and Policy Research (VEPR), by the end of the first quarter of 2019, foreign exchange reserves have surpassed the threshold of VND 65 billion and increased the foreign exchange reserves in the first 6 months. This is a good signal for the SBV to regulate monetary policy and stabilize the exchange rate before international fluctuations. Besides, the import turnover of Vietnam is increasing over the quarters, facilitating the exchange rate management in the necessary period.

In control

According to economist Can Van Luc, from now until the end of the year, the exchange rate will fluctuate by 1.5-2%. This is also a forecast of many economic experts about the evolution of exchange rates, of which, 2% is the highest threshold for the exchange rate to rise.

Experts of Bao Viet Securities Joint Stock Company (BVSC) said that they still maintain the view that the exchange rate in 2019 will be stable with a devaluation of less than 2% when Vietnam's foreign exchange reserve is at a high level and the SBV is able to adjust the exchange rate when there are unexpected fluctuations. Moreover, the central exchange rate will continue to be slightly adjusted by the SBV to create a "buffer zone" in case of unexpected fluctuations. Meanwhile, the exchange rate of banks is expected to remain flat, fluctuating in a narrow range due to the good supply of foreign currency from FDI and FII.

However, analysts still warn that exchange rates may fluctuate if special events such as the trade war or interruption of foreign capital inflows into Vietnam occur. However, now, the pressure from the process of monetary normalization in major economies in the world has decreased. This will help the SBV reduce pressure on the exchange rate and interest rate management. Therefore, these two "variables" are not expected to fluctuate much in 2019 and may be within the set target.

An important issue noted by experts is that Vietnam is on the list of countries that oversee US currency manipulation. This has required the SBV to administer the exchange rate flexibly and objectively and respect the market rules to absorb external shocks. "Lowering the value of the VND to enhance trade will be a poor decision at this time," VEPR said.

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Thus, although there is a very positive view on Vietnam's currency and foreign exchange market, the warnings will never be redundant. Although the State Bank always affirmed that it has enough tools to control the exchange rate stability and balance of the economy; but the initiative of the market, enterprises and people to prevent exchange rate risks is necessary.