The US dollar unexpectedly surged.

The USD/VND exchange rate unexpectedly surged.

Early on the morning of April 18th, the USD/VND exchange rate was relatively stable. However, towards midday, the US dollar unexpectedly heated up and surged in both the banking and free markets.

Vietnam Foreign Trade Commercial Bank ( Vietcombank ) listed the USD/VND exchange rate at: 23,330 VND/USD (buying) – 23,700 VND/USD (selling), an increase of 40 VND/USD in both buying and selling rates compared to earlier this morning.

The US dollar at Asia Commercial Bank (ACB ) also saw a similar rate of increase as at Vietcombank. The USD/VND exchange rate traded at 23,360 VND/USD – 23,650 VND/USD.

The USD unexpectedly rose sharply (Figure 1). — The US dollar unexpectedly surged globally, but the USD/VND exchange rate is still projected to remain stable in 2023. Photo: Reuters/Dado Ruvic/Illustration

The Vietnam Investment and Development Bank ( BIDV ) listed the USD at 23,360 VND/USD – 23,660 VND/USD, an increase of 30 VND/USD. At the Vietnam Export Import Bank (Eximbank), the exchange rate was traded at 23,280 VND/USD – 23,660 VND/USD, an increase of 20 VND/USD.

Techcombank (Vietnam Technological and Commercial Bank) adjusted the US dollar exchange rate, increasing it by 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) maintained its 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, an increase of 50 VND in the buying rate but a decrease of 20 VND/USD in the selling rate.

Effects from the global market

The USD/VND exchange rate surged as the dollar strengthened significantly in global markets after manufacturing activity in New York State rose for the first time in five months in April, bolstering expectations that the Federal Reserve (FED) will raise interest rates in May.

Also supporting the dollar was a report showing that confidence among homebuilders in the U.S. improved for the fourth consecutive month in April.

The dollar index, a measure of the currency against six major currencies, rose 0.413% after the Empire State Manufacturing Index surged to 10.8 from -24.6 in March, far exceeding expectations of -18 in a Reuters poll of 35 economists.

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

Marc Chandler, director of market strategy at Bannockburn Global Forex in New York, said: “This is the best result since last July, with order volumes surging and pushing the dollar higher as a result.”

“The economy appears to still be growing above the rate limit the Fed considers,” he said. “The market is underestimating the chances of another rate hike after May. Now the market assumes the Fed will cut after that, but I think the economy is showing resilience.”

Futures trading suggests the probability of the Fed raising lending rates to around 5.00%-5.25% when policymakers conclude their two-day meeting on May 3rd has risen to 88.7% from 78% on Friday, according to CME Group's FedWatch tool.

Fed fund futures also indicate that expectations that the Fed will begin cutting interest rates later this year have been pushed back to November from September, with smaller cuts now anticipated.

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

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

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

Jane Foley, head of foreign exchange strategy at Rabobank, said: “The dollar has rebounded but we’ve also received comments from the Bank of Japan suggesting there’s no real reason for them to back down their ultra-loose policy.”

The new governor of the Bank of Japan, Kazuo Ueda, made it clear last week that the country will remain a "dovish" exception by keeping interest rates extremely low for the time being.

Comment (0)