A week after the governor of the State Bank of Vietnam (SBV)’s decision to expand the margin of the VND/USD was applied to credit institutions compared to the inter-bank exchange rate from ± 0.25% to ±0.5%, no change in foreign currency market has occurred.
The exchange rate of VND to USD was expected to fluctuate from VND16, 050-16,060 against the US dollar on the free market and the rate is stable till today.
As the lunar new year is coming, more US dollars are sold; consequently the exchange rate of USD slumps.
There is no change in the exchange rate in the market and at banks although there is an expansion of the VND/USD margin. Moreover, the rate is lower than that of state bank announced, which has rarely happened so far.
Truong Van Phuoc, head of the SBV’s Foreign Exchange Management Department, explained; “The supply and demand has adjusted the rate. Currently, the abundant supply comes from increased indirect foreign investment, overseas currency remittance and export.”
Due to an abundant supply of USD, the SBV has bought in so much foreign currency from private commercial banks.
Another reason why there was no change in the foreign currency market is that state bank has abolished some short-term exchange rates, allowing no document check in transfers between hard foreign currencies.
Recently, the SBV has applied a negotiated exchange rate between the US dollar in cash and VN dong, meaning that banks which are permitted to buy US dollars are not bound by inter-bank exchange rates and rate margins.