The State Bank of Vietnam increased exchange rate by 1% and expands exchange rate band to 1% on August 19. Commenting on this, Mr. Pham Hong Hai-General Director of HSBC Vietnam said that this action reduces pressure of selling reserve foreign currency to the market, simultaneously; he advises enterprises should not trade the US dollar.

According to Mr. Hai, the State Bank of Vietnam expands USD/VND exchange rate band on August 12, 2015, immediately after the adjustment of USD/CNY exchange rate from China is a quick move and is a first-time-ever action happens in Vietnam. That signal proves the State Bank of Vietnam is capable of handling challenges and considered as an essential step to stabilize the market. 

This adjustment contributes to reducing the pressure of selling reserve foreign currency to the market, which is not a sustainable step if continue.

Mr. Hai also mentioned that if enterprises purchase the USD under fluctuation, it would create unfavorably condition to the market place. Usually, after the unstable period, the market would set up a new equilibrium. His suggests enterprises should mentally stay focus and actively manage exchange rate risk instead of counting on exchange rate protections from State Bank of Vietnam.

In fact, this fluctuation indicates that unexpected changes on the world market will affect Vietnam market. In the future, China may cut interest rate, FED increases interest rate, and thus pushing RMB continues to depreciate. Due to this result, Vietnam should have flexible adjustments.

Therefore, as soon as the market stabilizes, enterprises should adopt risk management policies in order to avoid unexpected fluctuations of market in the future.

Besides, Vietnam still competes with China from commodity types to export market. In the long-term, we should invest in quality, thereby improving competitive advantage and status of Vietnam goods.

 Source: Vietnam Investment Review