HANOI – Vietnam's central bank engaged in significant monetary policy maneuvers in July, injecting nearly VND 66 trillion into the banking system while the nation's currency, the dong, continued its managed slide against the US dollar. These actions highlight the State Bank of Vietnam's (SBV) dual-pronged approach to navigating domestic economic needs against persistent external pressures.
Throughout July, the SBV pumped approximately VND 66 trillion (roughly USD 2.6 billion) into the market. This substantial liquidity injection was carried out primarily through open market operations (OMOs), where the central bank purchases valuable papers from commercial banks. The primary objective of this move was to ensure ample liquidity across the banking sector, prevent spikes in interbank lending rates, and provide commercial banks with sufficient capital to support credit growth for businesses and the broader economy.
This domestic support occurred simultaneously with a notable shift in the country's foreign exchange policy. The "tỷ giá trung tâm," or central reference rate, which is set daily by the SBV, followed a consistent upward trajectory throughout the month, reaching new highs. A rising central rate signals a managed depreciation of the Vietnamese Dong (VND) against the US Dollar.
Analysts interpret these coordinated actions as a reflection of the SBV's delicate balancing act. On one hand, the liquidity injection is crucial for maintaining economic momentum and ensuring financial stability within Vietnam. On the other hand, allowing the dong to weaken helps absorb pressure from a strong US dollar, which has been bolstered by global economic trends and US monetary policy. A weaker dong also serves to make Vietnamese exports more competitive on the global stage, a critical factor for the nation's trade-dependent economy.
This strategy allows the SBV to support domestic growth while avoiding the need to excessively drain its foreign exchange reserves to defend the currency at a fixed level.
Investors and market watchers are now closely observing the central bank's next moves, as it continues to navigate the complex interplay between stimulating domestic demand, controlling inflation, and managing its currency in a challenging global economic environment. The SBV's actions in July demonstrate a flexible and adaptive policy stance aimed at achieving stability on multiple fronts.
