Vietnam’s Central Bank Continues to Improve Exchange Rate Flexibility to Ease US Currency Concern

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Vietnam's central bank will continue to improve exchange rate flexibility over time. (Photo: Vietnamnet)

The State Bank of Vietnam (SBV) will continue to improve exchange rate flexibility over time, allowing the Vietnamese dong to move in line with the stage of development of the financial and foreign exchange markets and with economic fundamentals, while maintaining macroeconomic and financial market stability.

The agreement, announced in a joint statement by Treasury Secretary Janet Yellen and SBV Governor Nguyen Thi Hong after a virtual meeting on July 19, follows months of US pressure on Vietnam over its currency practices and ballooning US trade surplus.

According to the joint statement, the SBV underscores that “the focus of its monetary policy framework is to promote macroeconomic stability and to control inflation.”

Vietnam confirms that it is bound under the Articles of Agreement of the IMF to avoid manipulating its exchange rate in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage and will refrain from any competitive devaluation of the Vietnamese dong.

The Vietnamese central bank is also making ongoing efforts to further modernize and make more transparent its monetary policy and exchange rate framework.

The headquarters of the State Bank of Vietnam in Hanoi. Photo: VNA

It pledged to continue to provide necessary information for the US Department of Treasury to conduct thorough analysis and reporting on the SBV’s activities in the foreign exchange market in Treasury’s semiannual Report to Congress on the Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States.

“I welcome the constructive dialogue between the Department of the Treasury and the State Bank of Vietnam on currency policy, and the mutual understanding we have reached,” said Secretary Yellen. “I believe the State Bank of Vietnam’s attention to these issues over time not only will address Treasury’s concerns, but also will support the further development of Vietnam’s financial markets and enhance its macroeconomic and financial resilience.”

“I highly appreciate the work done by the technical levels of our institutions towards a shared understanding on currency matters based on the principles of partnership and mutual respect. The State Bank of Vietnam will continue to manage exchange rate policy within its general monetary policy framework to safeguard the proper functioning of the monetary and foreign exchange markets, to promote macroeconomic stability and to control inflation, not to create an unfair competitive advantage in international trade,” said Governor Hong.

Yellen and Hong are also committed to maintaining close cooperation between Treasury and the SBV, and look forward to addressing other shared challenges, such as supporting a strong and inclusive recovery from the Covid-19 pandemic.

Reuters said the Trump administration in its final weeks had declared Vietnam a currency manipulator and had threatened to impose punitive tariffs on imports from Vietnam.

Vietnam, which benefited from the shift of US supply chains away from China amid a tariff war, saw its goods trade surplus with the United State jump 25% in 2020 to $69.7 billion despite the Covid-19 pandemic. Vietnam is a growing source of US imports of furniture, electronics, computers and apparel.

Agreement applauded

The Vietnamese Foreign Ministry's spokesperson Le Thi Thu Hang. Photo: VNA

Spokesperson of the Vietnamese Foreign Ministry Le Thi Thu Hang affirmed on July 20 that the Vietnamese Government welcomes the outcomes of the online talks on July 19 between Governor Hong and US Secretary Yellen as well as the agreement reached the same day between the SBV and Treasury.

The agreement is the result of an effective dialogue and consultation process in the spirit of cooperation and mutual respect between the two countries’ relevant agencies.

This result also opens up opportunities for closer collaboration between Vietnam and the US in financial and monetary affairs to promote post-pandemic economic growth, she stated.

The spokesperson went on to say that in the coming time, Vietnam will maintain constructive dialogue with the US side to handle issues in economic, trade and investment relations between the two countries, thus contributing to developing bilateral economic relations more stably and sustainably, for the interests of the two peoples and businesses, according to the Vietnam News Agency (VNA)./.

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