The USD/VND exchange rate mystery under Trump 2.0

US monetary policy is one of the major unknowns affecting the USD/VND exchange rate.

US monetary policy is one of the major unknowns affecting the USD/VND exchange rate.

Questions surrounding US monetary policy.

During the discussion session "Decoding Variables" at the "Investment 2025: Decoding Variables - Identifying Opportunities" conference organized by Investment Newspaper, the topic of monetary policy in the US was particularly hot, as the Federal Reserve (Fed) will hold its final interest rate decision meeting of the year next week.

According to Mr. Hoang Quoc Anh, Investment Director of GHGInvest, the performance of 2-year Treasury bond yields, a factor that usually has a high correlation with the Fed's interest rate decisions after the recently released November 2024 CPI data, suggests a high probability that the Fed will cut interest rates a third time by 25 basis points. Investors are also placing the most bets on this possibility.

Mr. Hoang Quoc Anh, Investment Director of GHGInvest

However, there is a less optimistic outlook on the global outlook for next year. Dr. Nguyen Tri Hieu, Director of the Institute for Research and Development of Global Financial and Real Estate Markets, predicts that US interest rates will rise, leading to a shift in the Fed's monetary policy. The reason for this shift is the possibility that the world's number one economy may once again face the risk of rising inflation.

During Trump's second term, this expert worried that commodity prices would rise sharply after tariffs were imposed. He also argued that Trump's new immigration policies would lead to a labor shortage in the US market; and his tax cuts for the wealthy would exacerbate the US budget deficit. This could lead to the US government being forced to issue high-interest bonds to balance the budget. "Given these factors, I predict that US interest rates will rise, leading to a shift in the Fed's monetary policy," Hieu emphasized.

Mr. Trinh Ha, Strategy Specialist at Exness Investment Bank

Meanwhile, Trinh Ha, a strategist at Exness Investment Bank, believes that Trump's policies will follow a certain trajectory. A positive point is that the Fed is expected to continue cutting interest rates in 2025. While sharing the same view on inflation risks, Mr. Ha also mentioned the loosening of restrictions on oil and gas exploration under Trump 2.0, a factor that could impact oil and gas prices, thereby somewhat reducing inflationary pressure. This expert suggests that the pace of interest rate reductions may be slower than previously predicted, with the long-term neutral interest rate potentially remaining higher at 3-3.5%.

Pressure on the USD/VND exchange rate

According to Dr. Nguyen Tri Hieu, the rising value of the dollar is putting pressure on the exchange rate. This expert predicts that the USD/VND exchange rate has increased by 4.5% so far, could rise to 5% this year, and will continue to fluctuate upwards, heavily dependent on US monetary policy.

Sharing the same view, Barry Weisblatt David, Director of Analysis at VNDirect Securities Joint Stock Company, also stated that inflation risks from Trump's policies are changing the company's forecasts when building base scenarios. With the DXY index pegged at a high level, the USD/VND exchange rate will face significant pressure. Barry Weisblatt David also left open the risk that the State Bank of Vietnam might have to raise interest rates if exchange rate pressure gets out of control.

With the dollar likely to maintain its strength, Mr. Trinh Ha believes there is increased pressure on the exchange rate. However, in the short term, the DXY index, which measures the strength of the US dollar, is currently at 106-107 points, reflecting investor expectations and having been somewhat pushed too high. Once the year-end seasonal factor is excluded, a cooling of inflation will alleviate some of the pressure on the dollar.

Despite the unpredictable risks posed by President-elect Donald Trump's trade policy messages, expectations of export growth and economic development are positive internal factors impacting the exchange rate. Regarding the new tariff policies of President-elect Donald Trump, Mr. Quoc Anh recalled Trump's first term four years ago, when China was subjected to 60-100% tariffs by the US, and the Vietnamese market experienced positive impacts. At that time, according to the Investment Director of GHGInvest, exports to the North American market accounted for 40% of Vietnamese goods.

For the Chinese market, for the first time in 14 years, China has committed to easing monetary policy to support growth. This signals that China will strongly stimulate growth through fiscal policy, lowering interest rates to boost economic growth. As a neighboring country, Vietnam also benefits. In this context, Mr. Quoc Anh believes that the Vietnamese economy is facing positive opportunities stemming from both the US and China.

Regarding the domestic market, a representative from GHGInvest stated that Vietnam is aggressively pursuing restructuring in both the public and private sectors. “I feel very optimistic and have high expectations for the Vietnamese market,” said Mr. Quoc Anh. Furthermore, the domestic market is showing a more positive sentiment. As a company measuring consumer purchasing power, attitudes, and behavior, NielsenIQ Vietnam has assessed consumer pressures including factors such as consumer economic and financial conditions, actual daily spending levels, and comfort levels in life.

Ms. Dang Thuy Ha, Director of Customer Behavior Research and Northern Region Representative, NielsenIQ Vietnam

Ms. Dang Thuy Ha, Director of Customer Behavior Research and Northern Region Representative of NielsenIQ Vietnam, stated that NielsenIQ's research shows that up to 67% of Vietnamese people believe their financial situation will improve, a figure that is over 50% a year ago. This data reflects a change in income levels and also demonstrates confidence in economic recovery.

According to Ms. Ha, the positive aspects of import and export, FDI investment, and public investment will boost consumer behavior in Vietnam. Survey data from NielsenIQ Vietnam shows that about 35% of respondents believe economic growth will be above 6.5%, 45% believe in a growth rate of 5.5-6.5%, and only about 20% are not very optimistic, expecting growth below 5.5%.

Source: https://baodautu.vn/an-so-ty-gia-usdvnd-duoi-thoi-trump-20-d232452.html