Vietnam Central Bank Prepared to Intervene as Dong Hits Record Low

The State Bank of Vietnam stands ready to intervene in the forex market as the Vietnamese dong hits a record low against the US dollar, highlighting the central bank's commitment to currency stability amid global economic challenges.

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Vietnam Central Bank Prepared to Intervene as Dong Hits Record Low

Vietnam Central Bank Prepared to Intervene as Dong Hits Record Low

The State Bank of Vietnam (SBV) has announced its readiness to intervene in the foreign exchange market as the Vietnamese dong fell to a record low against the US dollar, reaching 25,463 per dollar. This move comes in response to the strengthening of the US dollar globally, which has affected emerging market currencies.

SBV Deputy Governor Dao Minh Tu stated the possibility of intervention "even today, if needed," highlighting the central bank's commitment to stabilizing the currency. The SBV has already taken measures to reduce pressure on the dong, such as issuing Treasury bills to absorb dong from the market and selling the US dollar to banks at a rate of 25,400 dong per dollar.

The resilience of the US dollar is exerting pressure on Asian currencies, with finance ministers from Japan, South Korea, and the United States engaging in verbal interventions to signal their readiness to counteract currency volatility. This situation is attributed to the delay in rate cuts by the Federal Reserve, which has reinforced the dollar's strength and contributed to growth disparities with China, putting additional pressure on the yuan and, consequently, other regional currencies.

Why this matters: The depreciation of the dong and other Asian currencies can have significant impacts on the region's economies, affecting trade, investment, and financial stability. The SBV's intervention signals the importance of maintaining currency stability amidst global economic challenges.

Vietcombank sold the dollar at VND25,473 on April 19, 2024, up 0.13% from the previous day, while the dollar went up 0.27% to VND25,670 on the black market. The SBV has committed to ongoing monitoring of the exchange rate and intervening as needed to ensure the stability of monetary and foreign exchange markets. Deputy Governor Tu emphasized, "The State Bank of Vietnam is prepared to immediately intervene in the foreign exchange market if the exchange rate of the Vietnamese dong has a negative impact on the economy."

Key Takeaways

  • SBV ready to intervene as Vietnamese dong hits record low vs USD
  • SBV sells USD to banks at 25,400 dong to ease exchange rate pressure
  • US dollar strength exerts pressure on Asian currencies, including the yuan
  • Currency depreciation can impact trade, investment, and financial stability
  • SBV committed to monitoring exchange rate, intervening as needed to ensure stability