Vietnam c.bank expands dong trade band, currency hits record high
HANOI, Oct 17 (Reuters) – The State Bank of Vietnam (SBV) effectively devalued the dong by widening the exchange band to 5.0% from 3.0% on Monday, following a sharp decline in currency resulting from fluctuations in the global market.
The dong fell 0.66% to a record low of 24,270 to the dollar on Monday, according to data from Refinitiv Eikon. The reference daily rate set by SBV was 23,586.
“The State Bank will continue to monitor the market closely and stands ready to sell foreign currency to stabilize the market,” the central bank said in a statement.
Vietnam’s foreign exchange reserves have grown steadily over the past decade and reached $100 billion by the end of 2021 from $92 billion the previous year.
Nevertheless, SBV said this year it injected “a large amount” of foreign currency into the market, but did not specify the amount.
Some market analysts estimate that SBV has sold about $20 billion so far this year to commercial banks to support the exchange rate. However, this amount excludes forward contracts canceled by banks and contracts not yet matured.
The move follows the impact of rate hikes by the US Federal Reserve, the protracted conflict between Russia and Ukraine as well as rising energy prices, SBV said.
Last month, SBV also hiked policy rates by 100 basis points in a rare tightening move aimed at keeping inflation below 4% this year. (Reporting by Phuong Nguyen editing by Ed Davies)