Domestic free USD price fluctuates strangely on the day Mr. Trump won the election

The USD Index (DXY) today, November 6, increased by approximately 2%, to more than 105.4 points on the day Mr. Trump declared his victory. Domestically, the USD/VND exchange rate at banks increased, but in the free market it plummeted.

After the Fed's interest rate cut, many experts predicted that the exchange rate would cool down and foreign capital would return to Vietnam's stock market, but things did not go as expected - Photo: QUANG DINH

Why is the USD price "tight" again?

The US Dollar Index (DXY), which measures the greenback's fluctuations against six major currencies (EUR, JPY, GBP, CAD, SEK, CHF), increased by nearly 2%, reaching 105.43 points on the evening of November 6, Vietnam time.

The USD jumped as the US election came to an end, with the Speaker of the House of Representatives declaring Mr. Trump the winner of the presidential election.

The strengthening trend of the USD puts pressure on domestic exchange rates. Banks have increased USD prices today.

At Vietcombank , the buying and selling prices for each USD are listed at 25,140 - 25,470 VND, an increase of 10 VND compared to yesterday's session.

Going against the trend, the USD price in the free market simultaneously dropped sharply by 180 VND in both directions today. Foreign currency buying points commonly listed the price at 25,600 - 25,700 VND (buy - sell).

The USD/VND exchange rate has recently "heated up" again. The Vietnamese Dong previously only lost 1.2% against the USD until the end of September 2024. But in October, the Vietnamese Dong lost more than 4% against the USD.

The strong USD has caused some other currencies in the region to depreciate more than VND, including: Japan's JPY (-5.1%), South Korea's KRW (-4.9%)...

According to analyst Nien Nguyen of Shinhan Securities, in addition to external factors, a number of domestic events that took place in October caused the VND/USD exchange rate to increase sharply.

Exchange rate developments - Data: VCI

"The sharp increase in DXY, along with interbank interest rates at times falling below 3%, caused the USD-VND interest rate gap to widen. Also in the month, businesses and the State Treasury increased their purchases of USD. These events caused the exchange rate to increase rapidly by 2.9% in just 1 month," said a Shinhan Securities expert.

Exchange rate is tight, stock market is "nervous"

Expert Nien Nguyen admitted that after the Fed's interest rate cut, he expected the exchange rate issue to cool down and foreign capital to return to the Vietnamese market starting from October. But things did not go as expected.

Foreign investors continued to net sell more than VND11,000 billion in the Vietnamese stock market in October after the Fed lowered interest rates.

	Net sell
January	876
February	-1418
March	-11075
April	-5193
May	-19099
June	-16375
July	-8954
August	-4617
September	-2490
October	-11000
Early November	-2354

Shinhan Securities experts also said that to control the exchange rate, the State Bank has taken intervention measures such as withdrawing money from the system and selling USD to curb the increase in the exchange rate since October 22.

"The US dollar and government bonds are safe assets that investors can seek and this could cause the US dollar to continue to increase in price until the end of the year," Shinhan Securities experts predicted.

Expert Hoang Thuy Luong - senior manager of Vietcap Securities - commented that domestic demand may continue to put pressure on the USD/VND exchange rate until the State Treasury completes its purchases, while the prospect of the US election and international gold prices may pose additional risks to the exchange rate.

However, according to Vietcap experts, the latest move by the State Bank could help reduce pressure on the USD/VND exchange rate and foreign exchange market sentiment. In addition, the Fed may continue to cut interest rates later this year, foreign currency supply from trade surplus, FDI capital and remittances will make the exchange rate less "hot". Vietcap forecasts that the USD/VND exchange rate will increase by 3% in 2024.

Why do foreign investors often withdraw money when exchange rates increase?

One of the reasons why foreign investors tend to sell net when exchange rates increase is because of the increased risk, reducing expected profits.

Accordingly, the exchange rate increases the country risk premium, causing the expected risk-adjusted return of stocks in the Vietnamese market to decrease. From the perspective of asset allocation of global funds, when expected returns decrease, funds tend to reduce the proportion of holdings of assets with low expected returns.

Domestic investors tend to look for safer investment opportunities, while foreign investors may temporarily withdraw capital to wait for more positive signals.

Source: https://tuoitre.vn/gia-usd-tu-do-trong-nuoc-bien-dong-la-ngay-ong-trump-thang-cu-2024110620483406.htm