VietNamNet Bridge – If the State Bank of Vietnam (SBV) had not made the timely intervention, the dollar prices would have tumbled more dramatically in recent days.

This was for the first time since August 7, 2013, that the State Bank’s Exchange raised the dollar purchase price sharply, the move aiming to brake the decrease of the dollar price. The action has helped the dollar prices quoted by commercial banks to return to VND21,110 per dollar level.

The new exchange rate does not represent a big gap if compared with the VND21,115 per dollar rate which has been stabilized since the end of 2013. However, it reflects a new situation.

Central bank continues buying dollars

What happened on the 2012 pre-Tet days are repeating now, just three weeks before the 2014 Tet. The dollar price has been decreasing, though the decrease is less sharp than the VND300 per dollar decrease in 2012.

In 2012, commercial banks lowered the dollar purchase prices by VND300.

Governor of the State Bank Nguyen Van Binh said at the online conference gathering government agencies and local authorities held on December 24 that the State Bank was buying foreign currencies.

Experts have noted that the State Bank’s dollar collection activities have become clearer recently, when the interbank market witnesses the sharp falls of the dollar prices.

On January 10, the dollar price dropped to VND21,085 per dollar, or much lower than the buy price quoted by the State Bank’s Exchange at VND21,100 per dollar.

Experts have also noted the tendency of converting dollars into Vietnam dong on pre-Tet days in the last three years. This has been explained by the dong/dollar exchange rate stabilization, which makes investors and businessmen feel secure when programming their business plans.

Governor Binh, in a recent statement, said the dong would not be devaluated by more than two percent in 2014.

There is another reason behind the tendency – the high demand for dong in the last months of the year. Businesses need dong to make payment, pay to workers. Therefore, the experts believe that selling dollars for dong is a reasonable behavior.

Current factors support dong/dollar exchange rate stabilization

The State Bank made a noteworthy move on August 7, 2013, when raising the dollar purchase price from VND20,826 per dollar to VND21,100.

This means that the State Bank, on one hand, has been trying to buy dollar to increase the national foreign currency reserve, but on the other hand, does not intend to let the dollar price fall down too sharply, because this would harm the export.

Experts have every reason to believe that the dollar price would not fall from the current rate of VND21,110 per dollar, once the State Bank shows its determination that the exchange rate needs to help boost exports.

HSBC, in its latest report about Vietnam’s economy, pointed out that the exchange rate stabilization would help stabilize the country’s payment balance.

The trade balance was recovered in the second half of 2013 thanks to the better export, which experts believed was supported by the weaker dong.

TBKTVN