Several Asian currencies have recently fallen sharply, including the Japanese yen, the Korean won, and the Vietnamese dong, which we have already noted.
Not long ago, it took a little more than 23,000 dong to exchange one dollar, but these days it takes 25,500 dong to do so.
In response to this unfavorable situation, officials of the State Bank of Vietnam advised the public to exercise caution when dealing with credit institutions in foreign currencies and not to conduct foreign currency transactions at will, which may violate the law.
They also asked local governments to convey information about foreign exchange regulations and foreign currency transactions to people. Nguyen Duc Lenh, deputy governor of the Ho Chi Minh City branch of the State Bank of Vietnam, said that foreign exchange agents can only sell foreign currency to individuals using Dong and are not allowed to sell foreign currency cash to individuals in exchange for Dong.
However, under the regulations, they can sell cash in foreign currencies to individuals with foreign passports.
Individuals who carry foreign currency cash or more than the specified amount of VND cash out of or into the international border ports of Vietnam must declare to the customs at the border ports.
Within the existing foreign exchange capacity, credit institutions will meet the amount of foreign exchange people need to pay for transactions based on the actual reasonable demand for each transaction.
The State Bank of Vietnam hopes to stabilize the situation by lowering the exchange rate.
To stabilize the exchange rate, the State Bank of Vietnam sold $110 million on April 22, another hundreds of millions of dollars on April 23, and about $220 million in dollars on April 2, claiming that expanding the supply of dollars is a key factor in stabilizing the exchange rate in the current stage, according to the Vietnam Economic Daily.
However, this intervention does not seem to have achieved satisfactory results. Although the exchange rate has recovered slightly, it is still above the ceiling set by the State Bank of Vietnam at 24,487 dong to the dollar.
They pay close attention to the development of the U.S. economy, which directly affects the exchange rate of the dollar against the Vietnamese dong.
In addition to selling dollars and buying back dong, the State Bank of Vietnam has also tapped its gold reserves.
They have launched a gold bar auction on April 22 to increase supply in the market. When the dong depreciated by 5 per cent in a short period of time, they adopted a decisive and aggressive mode of intervention.
The deputy governor of the State Bank of Vietnam, Thu Minh Thu, said that they will proactively carry out monetary policy management work, flexibly use monetary and fiscal policies, control inflation, support the recovery of economic growth, and timely adapt to the development of domestic and foreign markets to maintain the stability of the currency and foreign exchange market.
He also said that due to the US Federal Reserve's plan to delay interest rate cuts, positive employment data caused analysts to constantly adjust their forecasts, and rising geopolitical tensions and other factors also affected the interest rate reduction roadmap, which led to the depreciation of several currencies, including the Vietnamese dong and the Japanese yen, more than expected.
In order to curb the deep depreciation of the dong, the State Bank of Vietnam will not only sell gold and dollars, but also extend the maturity of debt repayment and pay interest to help companies tide over difficulties.
The policy was originally due to end on June 31 this year, but is now being considered for a delay to the end of 2024.
At the same time, they are also actively layout consumer credit, providing services for commercial banks, financial companies, etc., in order to achieve the goal of driving demand, while creating more favorable conditions.
The State Bank of Vietnam also plans to work with the Ministry of Public Security to use the national data center to consider providing credit for loans without collateral.
Vietnamese media said that when the US dollar strengthens, Asian currencies are the most affected. Many of the region's currencies have fallen sharply since the beginning of the year, as interest rates here are lower than in most other emerging markets.
Indonesia's central bank has used foreign reserves to buy its currency, Malaysia's has encouraged state-owned companies to repatriate and convert overseas profits into ringgit, China's state-owned banks have supported the yuan by selling dollars into the market, and the Philippines' central bank has delayed a planned rate cut this year.
Vietnam needs to adopt a similar strategy.
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