USD suddenly increased vertically

USD/VND exchange rate suddenly increased vertically

Early in the morning of April 18, the USD/VND exchange rate was quite stable. However, by noon, the US dollar suddenly “heated up” and skyrocketed in both the banking market and the free market.

Joint Stock Commercial Bank for Foreign Trade of Vietnam ( Vietcombank ) listed the USD/VND exchange rate at: 23,330 VND/USD (buy) - 23,700 VND/USD (sell), an increase of 40 VND/USD in both buying and selling compared to early this morning.

USD at Asia Commercial Joint Stock Bank ( ACB ) also increased at a similar rate as Vietcombank. The USD/VND exchange rate was traded at 23,360 VND/USD – 23,650 VND/USD.

USD suddenly increased in value, image 1 — The US dollar unexpectedly increased sharply globally, but the USD/VND exchange rate is still forecast to be stable in 2023. Photo: Reuters/Dado Ruvic/Illustration

Vietnam Joint Stock Commercial Bank for Investment and Development ( BIDV ) listed the USD at: 23,360 VND/USD - 23,660 VND/USD, up 30 VND/USD. At Vietnam Export Import Commercial Joint Stock Bank (Eximbank), the exchange rate was traded at: 23,280 VND/USD - 23,660 VND/USD, up 20 VND/USD.

Vietnam Technological and Commercial Joint Stock Bank (Techcombank) adjusted the dollar price up 12 VND/USD for buying and 13 VND/USD for selling to: 23,335 VND/USD - 23,680 VND/USD.

Meanwhile, the Vietnam Bank for Agriculture and Rural Development (Agribank) kept the exchange rate at: 23,280 - 23,640, unchanged from the end of yesterday. The Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) bought and sold USD at: 23,315 VND/USD - 23,675 VND/USD, up 50 VND for buying but down 20 VND/USD for selling.

Effects from the world market

The USD/VND exchange rate increased sharply as the dollar strengthened in the world market after manufacturing activity in New York state increased for the first time in five months in April, helping to strengthen expectations that the Federal Reserve (FED) will raise interest rates in May.

Also supporting the dollar was a report showing US homebuilder confidence improved for a fourth straight month in April.

The dollar index, a gauge of the currency against six major peers, rose 0.413% after the Empire State Manufacturing index jumped to 10.8 from -24.6 in March, well above expectations of -18 in a Reuters poll of 35 economists.

The new orders index rose 47 points to 25.1, while the shipments index rose 37 points to 23.9, a significant increase after falling in recent months, the New York Fed said.

“This is the best result since July last year with orders surging and it has pushed the dollar higher on that,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

“The economy still looks like it’s growing above what the Fed thinks is its speed limit,” he said. “The market is underestimating the chances of another rate hike after May. Now the market is pricing in a cut after that, but I think the economy is showing resilience.”

Futures trading showed the probability of the Fed raising its benchmark lending rate to a range of 5.00%-5.25% when policymakers conclude their two-day meeting on May 3 rose to 88.7% from 78% on Friday, CME Group's FedWatch Tool showed.

Fed funds futures also showed expectations the Fed would start cutting rates later this year have been pushed back to November from September, with a smaller cut now expected.

The outlook for US interest rates relative to the monetary policies and economies of other countries can boost or erode the value of the dollar.

The euro fell 0.66% to $1.0926 after hitting a one-year high of $1.108 on Friday. Traders expect further interest rate hikes from the European Central Bank as concerns about last month’s banking crisis have faded.

The yen weakened 0.45% to 134.40 per dollar as the Bank of Japan continued to maintain its monetary easing policies, helping the greenback rise to its highest since March 15.

“The dollar has bounced back but we also got comments from the Bank of Japan suggesting that there is no real reason for them to pull back on their ultra-loose policy,” said Jane Foley, head of FX strategy at Rabobank.

The Bank of Japan's new governor Kazuo Ueda made it clear last week that the country will remain a "dovish" exception by keeping interest rates ultra-low for now.

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