© Reuters. A Vietnamese flag flies atop the State Bank building in central Hanoi
By Khanh Vu
HANOI (Reuters) – The State Bank of Vietnam, the central bank, said on Thursday it is not pursuing an “unhealthy competitive advantage” in international trade after the Trump administration raised concern over currency practices this week.
The U.S. Treasury Department, in a semi-annual report to Congress, said it reviewed the policies of an expanded set of 21 major U.S. trading partners and found that nine required close attention due to currency practices, including Vietnam.
“The State Bank of Vietnam will coordinate with relevant agencies to discuss and address the issue raised by the U.S. Treasury in a cooperative manner,” the central bank said.
The central bank said it would pursue a flexible foreign exchange rate “in accordance with domestic and international market conditions”.
The United States is Vietnam’s largest export market and the Southeast Asian country is seeing an ever-widening trade surplus, which rose to $13.47 billion in the first four months of this year from $10.19 billion a year earlier.
Last week, the central bank said it was ready to pump U.S. dollars into the market to stabilize the dong currency’s exchange rate, as it had come under pressure due to fallout from the U.S.-China trade war.
Vietnam’s dong has weakened 0.97 percent this year and has fallen 2.7 percent from a year earlier, according to Refinitiv Eikon data. The dong was quoted at 23,416/23,418 to the dollar on Thursday.
ING Bank said in a note on Wednesday that Vietnam was at risk of being labeled a currency manipulator because of its trade surplus with the United States, a highly positive current account balance (+5.4% of GDP) and the fact that its central bank had been quite active in terms of net foreign exchange purchases.
“If this happens, the impact on the dong isn’t very easy to prefigure. But in the long term, it’s fair to believe the currency may face upside pressure against the USD, in particular, if the negotiations that follow prompt a change in currency intervention practices,” ING said.
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