Central bank ready for market intervention to stabilize exchange rates: official

It could also use monetary policy to manage and stabilize the foreign exchange market, Deputy Governor Dao Minh Tu said at the government meeting on Wednesday.

"The exchange rate is a crucial macroeconomic indicator, affecting the purchasing power of the Vietnamese currency and other economic policies," he said. "Therefore, the State Bank of Vietnam is committed to flexible management to ensure the exchange rate is appropriate."

Last month, the central bank mopped up VND164.3 trillion ($6.6 billion) by issuing treasury bonds to banks to strengthen the dong.

It managed to check the dollar’s appreciation, he said.

However, after the central bank stopped issuing bonds at the beginning of this month the greenback has shot up in the past few days.

On Wednesday the dollar rose to an unprecedented VND25,120-25,242 at banks.

It is trading on the black market at VND25,440-25,540.

Tu explained that the recent spike in the dollar’s value was because the U.S. has not yet spelled a timeline for cutting interest rates.

This has caused many currencies to depreciate against the dollar and not just the dong, he said.

Vietnam’s lower interest rates than the U.S. are also put pressure on the exchange rate, he added.

In the year to date, the dollar has appreciated by 2.87% against the dong, which however has been more resilient than many other currencies, Tu said.

The Japanese yen, for example, has declined by 7.52%, he pointed out.