The recent volatility of the USD/VND has been driven by market sentiment which has been dominated by the continuous decline of the Chinese yuan and speculation on the Fed’s possible hike of interest rates, Nguyen Thi Hong, deputy governor of the State Bank of Vietnam (SBV), told local press on the sidelines of a conference on Dec. 17.
Regarding the Fed’s decision on raising its policy rate by 0.25 percentage point on Dec. 16 (Hanoi time), Ms. Hong said that the news had been factored in the market.
She tipped that the local forex market was cautious at the open on Dec. 17 after the Fed’s announcement, but returned to normal soon after that.
She analyzed that Vietnam posted trade surpluses of $500 million in October and $263 million in November. In addition, disbursed foreign direct investment increased 17.9% in the 11 month through November.
“This data shows that foreign capital keeps running to Vietnam and the supply-demand of forex has seen no abnormalities and has been affected by psychological factors,” she noted.
She added that foreign investment capital in Vietnam is mainly medium- and long-term.
When the Fed hinted the end of quantitative easing in 2013, the outflow of short-term capital in Vietnamese stock market was not considerable. Meanwhile, FDI in Vietnam is firm and buoyant because the government pursues macroeconomic stability and economic reforms, she said.
She believed that the People’s Bank of China (PBoC), the Chinese central bank, would not dump its currency deeply, otherwise the capital flight will occur and the financial market will become more complicated.
“We [the SBV] would like to emphasize that the recent volatility has been caused by market sentiment. We will continue to keep close eyes and take necessary measures to keep the forex rate and forex market steady,” Ms. Hong affirmed.