Goldman Sachs: Vietnam Central Bank Move Is Necessary

Recent prompt interventions by the State Bank of Vietnam, the country’s central bank, are necessary to stabilize the domestic monetary market, Goldman Sachs has praised in a report.

 

The report was released Nov 25 after the SBV decided to hike the base interest rate to 8% per annum from 7% effective from Dec 1, reset the inter-bank dollar exchange rate up 5.44% to VND17,691 and narrow the trading band by 2% to 3% from Nov 26.

 

The U.S.-based bank said the rate hike by the SBV is essential to help control overheated growth and high inflation and currency devaluation is due to concerns on the soaring trade deficit and low forex reserves.

 

Goldman Sachs, meanwhile, considered the tightened forex trading band as a part of SBV efforts in curbing the depreciation of the dong against the U.S. dollar during intra-day trading.

 

Goldman Sachs’ report also said that Vietnamese government’s supports for state enterprises to transfer foreign currency sources (earned from exports) to the SBV will help it have better capacity in protecting the dong before the depreciation risk. (Goldman Sachs Report, VnEconomy)