Tiếng Việt
中文 (中国)
The State Bank of Vietnam (SBV) has taken proactive steps to adapt to the rapidly changing domestic and international market conditions by revising a crucial circular governing foreign currency transactions. To enhance flexibility and initiative in managing monetary and exchange rate policies, the SBV’s move signifies a strategic response to the dynamic nature of the global financial landscape.
The draft circular, recently made available for public feedback, seeks to amend Circular 02/2021/TT-NHNN stipulating foreign currency transactions among banks authorized to engage in such activities within Vietnam’s domestic foreign currency market. This revision underscores the SBV’s commitment to ensuring effective regulation and supervision while fostering an environment conducive to market operations.
One of the key motivations behind the proposed amendments lies in the recognition of the swift and unpredictable shifts in market conditions, exchange rate levels, and interest rate differentials, both domestically and internationally.
In particular, the SBV’s attention has been drawn to the impact of interest rate differentials between the Vietnamese dong and the US dollar on the determination of forward exchange rates. The narrowing gap between these rates, as observed in certain periods such as 2022, has posed challenges to market liquidity and the foreign exchange market.
To address these concerns and maintain flexibility in monetary policy management, the SBV has proposed significant changes, notably in Clause 3 of Article 5 under Circular 02/2021/TT-NHNN. Instead of rigid stipulations, the revised circular seeks to introduce a more flexible mechanism whereby forward exchange rates will be determined by the parties involved in the transaction, under regulations issued by the SBV at the relevant time.
This shift towards a more market-oriented approach is designed to empower the SBV with greater scope for intervention in the foreign currency market. By allowing for the negotiation of forward exchange rates and facilitating foreign currency forward transactions, the SBV aims to exert influence on both exchange rate dynamics and interest rate differentials in the interbank market.
In conclusion, the SBV’s initiative to revise the circular governing foreign currency transactions reflects a proactive response to the evolving market dynamics. By embracing flexibility and market-driven mechanisms, Vietnam’s central bank aims to bolster its capacity to manage monetary and exchange rate policies effectively.
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