This morning, the State Bank of Vietnam increased the central exchange rate by 10 dong. This adjustment is based on interbank market developments, the currency baskets of major trading partners, macroeconomic balances, and policy objectives.

The US dollar is now convertible at 25,293 dong, closely approaching its peak of 25,298 dong established in late August last year.

Analysts view the central bank's consistent increase in the central exchange rate as a proactive defense against the US dollar's strong recovery. The DXY index, a measure of the greenback's strength, has risen 3% since the beginning of this year, while the central exchange rate has only edged up by approximately 0.7%. This indicates that the central rate is tracking global developments in a controlled manner.

With a 5% trading band around the central rate, commercial banks are permitted to trade the US dollar within the range of 24,028-26,557 dong.

After a period of stability, USD exchange rates at commercial banks this morning are nearing the upper limit of the allowed trading band. Vietcombank is buying at 26,140 dong and selling at 26,520 dong, an increase of 10 dong, corresponding to the central rate adjustment. Vietinbank, BIDV, and Eximbank also adjusted their rates upwards by 5-15 dong compared to the end of last week.

Meanwhile, free market foreign currency exchange points are buying at 26,400 dong and selling at approximately 26,450 dong, showing little fluctuation compared to last week.

In its monetary report released mid-this month, analysts from VNDirect Securities predict that exchange rate pressure could be partially balanced by positive foreign currency supply from foreign direct investment (FDI) inflows and sustained high dong interest rates. The group also believes the State Bank of Vietnam will likely continue to manage the exchange rate flexibly through a combination of open market operations (OMO), foreign exchange intervention, and currency swaps when necessary.

"We maintain the view that the USD/VND exchange rate will fluctuate within a range of approximately 1-2% this year," VNDirect analysts forecast.

SSI Research experts also expect "pressure on the exchange rate to remain under control" in the second half of the year if FDI inflows are stable and the foreign exchange market does not face major external shocks.

Phuong Dong