Vietnam’s exchange rate won’t go haywire this year: experts

The USD/VND reference rate set by the central bank fluctuated in the early days of this month, reaching VND22,723 last Tuesday, the highest so far this year, up 1.31 percent from the end of last year. 

Banks traded their dollars for VND23,315-23,395 on Tuesday.

But the central rate dropped by VND3 on Thursday, before returning to VND22,721 on Saturday, while local banks sold their greenback for VND23,300-23,385, VND10-15 lower than on Tuesday.

However, financial experts are confident that the exchange rate will remain stable in the last months of the year. 

Andy Ho, CEO of Vietnam’s investment fund VinaCapital, said that the country’s foreign exchange reserves of over $62 billion are enough to ease the burden that the weakening Chinese yuan might bring to bear on the dong.

The dong will only weaken if the government does so to boost exports, he added.

Ngo Dang Khoa, country head of global markets, HSBC Vietnam, said that the USD/VND exchange rate has been stable compared to other countries in the region. 

The dong has only fallen by 2.6 percent since the beginning of the year, while other currencies have seen steeper drops, especially the Indonesian rupiah which has fallen by 10 percent, he said. 

The dong will surely be affected by the weakening Chinese yuan because of the ongoing U.S.-China trade war, Khoa said, noting that that the CNY has fallen by 8 percent to the USD since April.

But the State Bank of Vietnam has made calculations with different variables, thus the dong won’t experience too many fluctuations in upcoming months, he said.

Local banks currently have good greenback reserves, and can supply customers who need between $1 million and $100 million, he added.

The country’s trade surplus of $6.32 billion and the disbursed foreign direct investment of $13.25 billion in the first nine months this year are positive factors that will also keep the USD/VND exchange rate stable, Khoa said.

The CEO of another foreign bank in Vietnam, who declined to be named, said the pressure on dollar repayments will not be high because the number of dollar borrowings was low.

As the government is pushing equitization of state-owned enterprises, successful acquisitions by foreign investors will bring in more dollars to Vietnam, he added.

In a recent report, the Standard Chartered bank projected that the USD/VND exchange rate will stand at around VND23,400 by the end of this year.

The bank expected a small dong depreciation early next year, before ending 2019 “mildly stronger against the USD as positive domestic and external factors support the currency.”