There are 3 factors affect the stability of the foreign exchange rate in

Vietnam
1. Monetary policy:
The State Bank of Vietnams effective and timely measures made important
contributions to realizing the governments economic management targets
to stabilize the macro-economy, control inflation, and lift the economy out of
stagnation. A key achievement of Vietnams banking sector for the year was
to drop the lending interest rate a move that strongly influenced the
domestic business community and contributed to the national economic
recovery. The decline in interest rates have helped businesses recover their
production and trading.
2. Political situation and economic performance:
Growing global tension will result in instability in the forex market. Irregular
inflow or outflow of currencies may result in significant fluctuations in
exchange rates. The stability of a foreign currency is closely related to the
political situation of that place. In general, the more stable the country is, the
more stable its currency will be.
Foreign investors inevitably seek out stable countries with strong economic
performance in which to invest their capital. A country with such positive
attributes will draw investment funds away from other countries perceived to
have more political and economic risk. Political turmoil, for example, can
cause a loss of confidence in a currency and a movement of capital to the
currencies of more stable countries. The political situation in Vietnam is
considered to be very stable for a long period of time. Moreover, Vietnam has
recovered steadily from the recession. The average annual GDP growth rate
of Vietnam from 2007 to 2013 is around 6%, which is a very ideal for the
recession period.
3. Government intervention:
Some governments attempt to influence the value of their currency.
Vietnamese government has taken many action to make sure that the
foreign exchange rate is stable. Because both monetary policy and fiscal
policy is under control of the government, the Vietnamese government can
execute the strategy that is to make sure the stability of the foreign
exchange rate.
4. Market Judgment
The forex market does not always follow a logical pattern of change. Exchange rates are also
influenced by intangible factors such as emotions, judgments as well as analysis and

comprehension of political and economic events. In reality, before these reports and data become
available to the public, the market would have already made its own predictions and judgments,
and these will be reflected in the prices. In the event that the actual reports and data deviate too
much from the predictions and judgments of the market, huge fluctuations in exchange rates will
occur. In Vietnam, many foreigners have had high hope about Vietnamese economy which turn
out to be true. As a result, the exchange rate in Vietnam is quite stable from 2007-2013..