In just the first three weeks of 2024, banks increased the USD price by 350 VND, or 1.5%, to around 24,765 VND/USD for selling and 24,395-24,425 VND for buying. Meanwhile, the increase for the entire year of 2023 was approximately 3%. On the free market, the USD price increased by about 1.7%, to 25,100 VND for selling and around 25,070 VND for buying. This increase in the dollar price is quite unusual given the abundant supply of USD in the market. Remittances from Ho Chi Minh City alone surged by 580 million USD in the last weeks of 2023 compared to the projected figure, reaching 9.5 billion USD for the whole year.
The US dollar rose 1.5% in the first three weeks of January.
Mr. Dinh Duc Quang, Managing Director of Currency Trading at UOB Vietnam, assessed that the fluctuation of approximately 1.5% against the US dollar is entirely consistent with the appreciation of the US dollar against major world currencies and currencies in emerging markets as the US economy continues its outstanding growth. Emerging market currencies such as the Thai Baht, Malaysian Ringgit, Indonesian Rupiah, etc., have depreciated by 2-3% in recent weeks.
In the free market, the USD/VND exchange rate experiences greater fluctuations than in the commercial banking system. However, according to Mr. Dinh Duc Quang, the trading volume in this market is very small compared to the overall activity of the domestic foreign exchange market. Therefore, larger fluctuations, if any, from the free market are not a significant factor that could put pressure on market stability.
The interest rate differential between the Vietnamese Dong and the US Dollar continues to be a factor impacting foreign exchange rates. Banks are trading USD interest rates at 5-6% per year, while the VND rate ranges from 0.12-4.4% per year. USD interest rates in the interbank market are 1.8-5% higher than the VND rate across various maturities. Mr. Dinh Duc Quang stated that the current record low interest rates for the Vietnamese Dong, both on deposits and in the interbank market, may continue in the near future as capital demand in the economy has not yet recovered to a high level. This will be a factor affecting capital and foreign exchange business plans at commercial banks in the short term. Along with this, customer demand for foreign currency may create temporary fluctuations in supply and demand in the market.
Regarding exchange rate forecasts for this year, UOB's recent report continues to offer positive assessments of Vietnam's macroeconomic factors and major balances, including the stability of the USD/VND exchange rate. UOB forecasts a slight appreciation of the Vietnamese Dong in 2024, given the prospect of improved domestic macroeconomic factors and the possibility of US dollar interest rate cuts starting from mid-2024. The USD/VND exchange rate is expected to remain stable in the range of 23,500 – 24,500 VND/USD in 2024.
Similarly, HSBC forecasts the USD/VND exchange rate to be at 24,400 VND/USD by the end of 2024, with Vietnam's economy expected to grow by 6% in 2024.
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