Foreign exchange rate approaches upper limit

Source: Pano feed

Tran Thu

Local banks on April 1 quoted the dollar selling price at VND21,595-21,610 a dollar, up VND5-30 from the day earlier. Vietcombank and VPBank offered the lowest price, at VND21,595, while ACB and DongABank quoted the highest rate, at VND21,610.

From the second week of March banks repeatedly revised up dollar prices, sending the exchange rate up to VND21,590 on March 24. Then, the rate fell to VND21,525-21,540 on March 25-26.

On March 25, the central bank clarified its position to keep the exchange rate movement within a band of 2% on either side this year as earlier targeted.

The central bank explained psychological factors were the main cause of the dollar surge on global markets in previous days. Meanwhile, dollar supply and demand in the country remains balanced while the balance of payments ran a surplus of US$2.8 billion in the first quarter.

Just several days after the announcement, the exchange rate has turned sharply volatile.

Ngo Dang Khoa, head of trading at HSBC Vietnam Bank, said the exchange rate increase is driven mainly by expectations that the U.S. Federal Reserve could raise interest rates this year.

Meanwhile, the greenback has been firmer against other currencies while the gap between domestic and global gold prices in Vietnam remains wide.

However, dollar demand did increase in the last week of March as enterprises had to finish payments at the end of the month or in the first quarter. Besides, some foreign investors bought dollars after taking profits out of the stock market.

Vietnam’s foreign currency supply stays strong thanks to foreign direct investment, incoming remittances and official development assistance (ODA) flows.

The central bank may intervene anytime to keep the market stable, Khoa said.

In a recent report updating Asian economies, HSBC said Vietnam has built up its foreign reserves to about US$36 billion. However, the central bank does not respond in a timely manner, squeezing domestic liquidity.

Should the central bank fail to respond in a timely fashion to either allow market demand or supply dynamics to determine the exchange rate or inject dollars into the system, liquidity may be thin, the report said.

The bank predicted the exchange rate at VND21,750 per dollar at the end of this year.

Đăng ký: VietNam News