Positive exchange rates

The VND exchange rate is more stable than many other currencies. Photo: ST

More stable than other currencies

According to the report of the State Bank (SBV), due to the negative impact of the Covid-19 pandemic on economic growth in general and enterprises’ operation in particular, the SBV and the credit institution system have focused all resources to control inflation, stabilize the macro economy, promptly remove difficulties for production and business activities, and support businesses.

The SBV has regulated the exchange rate in line with the macro situation, inflation, market movements and monetary policy targets. Specifically, continuously publishing the central daily exchange rate with reference to market movements, macroeconomic balances, currencies and monetary policy goals; synchronously coordinate with other solutions and tools on regulating liquidity, and interest rates in VND to stabilize exchange rates and markets; readjust reduction of selling exchange rate and be ready to sell intervention foreign currencies to stabilize the market, contributing to macroeconomic stability.

Over the past four months, although the exchange rate has increased compared to the end of 2019, the foreign currency market was basically stable, the market sentiment was not disturbed, especially the balance of supply and demand of foreign currencies was favorable, and market liquidity was smooth.In fact, the movement of exchange rate was stable, exceptfor a sharpincrease in the last week of March.At that time, the SBV reassured and saidthey were willing to sell exchange rate interventions to stabilize the market if necessary, so the exchange rate quickly returned to stability.

By the end of the first quarter, the exchange rate only fluctuated within a range of 1.3-1.5%. According to a representative of the SBV, the VND was much more stable than other currencies of many regional and global trading partners. Specifically, by the end of April, the Chinese Yuan (CNY) fell 1.73%, the Euro dipped 4.19%, the South Korean Won dropped 6.90%, the Thai Baht fell 9.23%, the Malaysian Ringgit decreased by 6.59%, the Singapore Dollar fell 5.88%, and the Indian Rupiah fell 11.06% compared to the end of 2019.

The USD price index in April increased by 0.95% over the previous month; up to 1.47% compared to December 2019 and rose 1.15% over the same period last year. According to the General Statistics Office, this increase was due to the fact that the world financial market has showed signs of decline, and investors have tended to hold cash. At the same time, according to the negative forecasts of the banking system in some countries, it might have to restructure capital due to the serious impact of the long-lasting Covid-19 pandemic, so the USD in the global market went up, affecting domestic prices.

Much pressure

Experts of Bao Viet Securities Company (BVSC) said maintaining the momentum of exchange rates like last time was a great effort. The USD has been strengthened in the global market, which was the main reason that the USD/VND exchange rate tended to increase in the end of March.

The Covid-19 pandemic has led to a sharp decline in the global financial market, the need to withdraw capital from risky assets and look for safe assets, which were the main reason for the sharp increase in the USD.

We do not "rejoice" too soon in the stable movements of the exchange rate mentioned above, because the Covid-19 pandemichas been complicated and changeable. The pressure has been on the exchange rate as well as how the SBV manages it. According to financial expert Dr. Nguyen Tri Hieu, the upward trend of the VND/USD exchange rate was clear, but in the near future, it depends on the evolution of the Covid-19 pandemic. If the pandemic persists, the pressure of increasing exchange rate will be available.

For the SBV, the management of a stable exchange rate is not only to stabilize the foreign exchange market but also to solve the balance problem for import-export, public debt, and inflation. Therefore, if the market is unstable andthe VND is devalued, it will greatly affect the macro economy. Thus, although the pressure on the exchange rate is real, the regulator will put many "life buoys" to stabilize the foreign exchange market.

In particular, the most notable is the SBV’s high foreign exchange reserves. With this reserve, experts believethe SBV was capable of intervening in the market when necessary to stabilize the foreign exchange market. Therefore, it is not easy for investors to "surf" and make profits based on exchange rate fluctuations. This will effectively support import-export businesses and goods circulation without price fluctuations, or even turn "challenges into opportunities" when enjoying exchange rate differences.