Exchange rate policy: too many cooks spoil the broth
Exchange rate policy: too many cooks spoil the broth
The State Bank of Vietnam (SBV) has stated that it won’t adjust the dong/dollar exchange rate in the time to come, affirming that it is the SBV which is the agency which sets up the exchange rate policy.
Deputy Governor of the State Bank of Vietnam Le Minh Hung gathered journalists to a press briefing on December 6, 2013, just to make a statement that SBV will not adjust the dong/dollar exchange rate during the remaining days of the year.
The press briefing took place several days after the dollar price began a new upward trend. And it was clear what the press briefing aimed to. The State Bank tried to reassure the public that it won’t devaluate the dong in the time to come, an effort to stop the dollar price hike trend.
The SBV’s representative, at the meeting with the local press, indirectly criticized the National Finance Supervision Council for the council’s report which the central bank believes the “culprit” behind the new dollar price increase.
“The dollar price increase in the last few days originated from the public’s expectations about a dong/dollar exchange rate adjustment, created by the comments and predictions about the exchange rate policy made by the National Finance Supervision Council in its November report,” Hung said.
The central bank believed that the suggestion by the council, acting as an advisory agency to the government, on a slight devaluation of the dong has triggered the new dollar price increase wave.
The council, in its report, suggested applying a “more flexible exchange rate policy” in 2014 which better support the competitiveness of Vietnam’s exports.
However, devaluing the local currency proves to be the idea of not only the National Finance Supervision Council. A lot of economists have also expressed their viewpoint that the exchange rate which has been stable for a long time would be good for export.
On December 4, BIDV’s Research Center released a report, predicting that with the adjustment of 2-4 percent and the trading band of 1 percent to be kept until the end of 2014, the dong/dollar exchange rate would be VND21,400-22,000 by the end of 2014.
Shortly after the organizations’ reports were made public, commercial banks began raising the dollar prices, the behavior described as “fishing in troubled water.”
The noteworthy thing was that the commercial banks raised their quoted dollar prices when the gold prices decreased sharply. Meanwhile, in principle, the dollar and gold price always go up and down together because of their close relation.
It was also a big surprise to people that while the dollar prices quoted by commercial banks were on the rise on those days, the black market’s prices decreased at the same time.
As such, the State Bank has re-affirmed that it is the agency which makes decisions about the exchange rate policy which will determine the market performance, while the market must not be interfered by any rumors or information from other unofficial sources.
The State Bank has also affirmed that it has been pursuing a stable exchange rate policy, not a fixed exchange rate policy.
vietnamnet
