Vietnam’s central bank unexpectedly hiked interest rates by 1 percentage point for a second month to support a currency that has fallen to a historic low.
According to the State Bank of Vietnam (SBV) statement, the action was made “to help control inflation, stabilize the dong and maintain a stable macroeconomy, and safeguard the operational safety of the banking system.” It also promised “to intervene in the foreign currency market” to accommodate banks’ need for dollars and maintain a steady money market.
The sharp rate hike, which comes just a week after the dong’s trading range was widened, highlights the difficulties confronting Asian central banks that are under pressure to cushion their currencies and prevent imported inflation while preserving their dollar stockpile. The dong and other currencies around the world have been affected by the Federal Reserve’s recent aggressive tightening policies.
