US Department of Treasury and SBV reach mutual agreement on currency practices

US Secretary of the Treasury Janet L. Yellen and State Bank of Vietnam (SBV) Governor Nguyen Thi Hong met virtually on July 19 to discuss Vietnam's currency practices. Particularly, the US has removed Vietnam from the list of economies it considers currency manipulators in April, reversing a decision made by the Trump administration in December.

At the conclusion of their meeting, Secretary Yellen and Governor Hong reaffirmed the two countries' mutual agreement on monetary policies.

"Accoridngly, the US and Vietnam are trusted partners with friendship grounded in mutual respect. In keeping with this strong partnership, the US Department of the Treasury and the SBV share the goals of maintaining the strength, stability, development, and resilience of each country’s economy and financial system," the US Department of the Treasury said in its annoucement. "Treasury and the SBV have had constructive discussions in recent months through the enhanced engagement process, and reached agreement to address Treasury’s concerns about Vietnam’s currency practices as described in the Treasury’s Report to Congress on the Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the US."

Furthermore, the SBV underscored that the focus of its monetary policy framework is to promote macroeconomic stability and to control inflation. Vietnam confirms that it is bound under the Articles of Agreement of the IMF to avoid manipulating its exchange rate in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage and will refrain from any competitive devaluation of the Vietnamese dong.

According to the US Department of the Treasury, Vietnam is also making ongoing efforts to further modernise and make more transparent its monetary policy and exchange rate framework. In support of these efforts, the SBV will continue to improve exchange rate flexibility over time, allowing the Vietnamese dong to move in line with the stage of development of the financial and foreign exchange markets and with economic fundamentals, while maintaining macroeconomic and financial market stability.

The SBV will continue to provide necessary information for the Treasury to conduct thorough analysis and reporting on the SBV’s activities in the foreign exchange market in the Treasury’s semiannual Report to Congress on the Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States.

The Treasury will inform other US government agencies that it has reached an agreement with the SBV to address the Treasury’s concerns about Vietnam’s currency practices.

“I welcome the constructive dialogue between the Department of the Treasury and the SBV on currency policy, and the mutual understanding we have reached,” said Secretary Yellen. “I believe the State Bank of Vietnam’s attention to these issues over time will not only address the Treasury’s concerns but also will support the further development of Vietnam’s financial markets and enhance its macroeconomic and financial resilience.”

“I highly appreciate the work done by the technical levels of our institutions towards a shared understanding on currency matters based on the principles of partnership and mutual respect. The SBV will continue to manage exchange rate policy within its general monetary policy framework to safeguard the proper functioning of the monetary and foreign exchange markets, to promote macroeconomic stability and to control inflation, not to create an unfair competitive advantage in international trade,” said Governor Hong.

Secretary Yellen and Governor Hong are committed to maintaining close cooperation between the Treasury and the SBV and look forward to addressing other shared challenges, such as supporting a strong and inclusive recovery from the COVID-19 pandemic.