The Central Parity Rate Management of the State Bank of Vietnam over the past period

Abstract

The State Bank of Vietnam issued Decision No. 2730/QDD-NHNN on December 31, 2015 on the mode of regulating a new exchange rate (Central Parity Rate) which came into effect as of January 4, 2016. Accordingly, The State Bank of Vietnam is using this rate as replacement for USD- based rate regulation which orientates the fluctuation margin for the year, in combination with the monetary policy tools for regulating the exchange rate in the framework of stated margin. 

It can be said that the USD-based regulation regime enabled the State Bank of Vietnam to gain many achievements during the period of 2012-2015 with the expectation peg for stable exchange rate, thus keeping market behavior and foreign exchange market stable. Most rate fluctuations were also maintained at the level oriented for the beginning of each year. However, the shortcomings of this regime has become more visible in the context of the world economy facing much unstability because value of USD can not be kept stably. 

In addition to clarify more clearly on the advantage of the central parity rate regime, the article’s author would like to evaluate more impacts of the regime’s application on the Vietname Economy from January 04, 2016 until now.