HANOI: The State Bank of Vietnam (SBV) has effectively devalued the dong currency by widening the exchange rate trading band to 5.0% from 3.0% on Monday, following a sharp fall in the currency resulting from fluctuations in the global market.
The dong fell 0.66% to a record low of 24,270 per dollar on Monday, Refinitiv Eikon data showed. The daily reference rate set by SBV was at 23,586.
"The State Bank will continue to monitor the market closely and stands ready to sell foreign currencies to stabilise the market," the central bank said in a statement.
Vietnam foreign reserves have seen rising steadily over the past decade and reached US$100 billion as of the end of 2021, up from $92 billion the previous year.
Nonetheless, SBV said this year it had pumped "a large amount" of foreign currencies into the market, but did not specify the amount.
Some market analysts estimate SBV in the year to date had sold around $20 billion to commercial banks to support the exchange rate. That amount, however, excludes forward contracts cancelled by banks and contracts yet to come due.
The move followed the impact of rate hikes by the U.S. Federal Reserve, the protracted conflict between Russia and Ukraine together with rising energy prices, SBV said.
SBV last month also raised policy rates by 100 basis points in a rare monetary tightening move aimed at keeping inflation under 4% this year.
