The foreign exchange rate may approach close to ceiling rate of VND21,890 and would not fall if foreign currency supply increased. — VNS Photo Truong Vi

HA NOI (Biz Hub)  — The foreign exchange market might face uncertainty with relatively increased pressure in the medium and long term, according to a research group of the Bank for Investment and Development of Viet Nam.

The research group forecast that the foreign exchange rate might reach VND21,850 against the dollar by the end of the second quarter, VND40 away down from the ceiling rate, reported vneconomy.vn, adding that no huge fluctuations were expected to occur within this month.

The exchange rate would hardly fall dramatically unless supply of foreign currency supply increased, according to researchers.

The news website reported that from the beginning of June the State Bank of Viet Nam started to sell the dollars and issue treasury bills to ease tensions in the forex market after the dollar rates showed a huge increase last month.

On May 7, the central bank raised inter-bank rate by 1 per cent for the second time this year to VND21,673 per dollar, leaving no room for any adjustment this year as it had earlier committed not to weaken the dong by more than 2 per cent in 2015.

On May 27, the central bank's Deputy Governor Nguyen Thi Hong signalled that the central bank could sell the dollars if necessary, which help calm the forex market.

Yesterday, the dollar buying rate of Vietcombank was VND21,780 and the selling rate was VND21,840.

The research group predicted that the exchange rates would fluctuate around VND21,800 and VND21,820 this month and around VND21,700 and VND21,890 in the third quarter of this year.

According to a market report by BIDV Securities, 1 per cent adjustment of VND/US$ rate in May would help boost exports and improve competitiveness of Vietnamese products.

However, the report said that attention should be paid to changes in the world market, especially the possibility of rate rises by Federal Reserve System (Fed).

In Fed raised rates, the greenback would become stronger which would create pressure on the forex market of Viet Nam.

Although Viet Nam ran a trade surplus in the first few months of this year, the central bank forecast that overall balance of payments would post a surplus for the full year. — VNS