With rising deposit interest rates, exchange rate pressure will ease from the third quarter onwards.

Suan Teck Kin, Director of Global Market and Economic Research at UOB Group, believes that pressure on the exchange rate will gradually ease in the final months of the year, while deposit interest rates will slightly increase. - Photo: AH

Deposit interest rates continue to rise.

UOB Bank has just released its 2024 business outlook study. At the announcement, a representative from UOB Vietnam stated that deposit interest rates at banks have increased by approximately 0.5-1% per year since the beginning of the year.

However, current interest rates are still lower than before the COVID-19 pandemic. For terms under 6 months, deposit interest rates remain below the regulated ceiling.

"We forecast that VND interest rates in the last six months of the year may continue to increase slightly by another 0.25-0.75% per year, creating a harmonious interest rate curve for maturities from 1-12 months."

"This is a fairly reasonable rate given the stable macroeconomic conditions, inflation has been and is being controlled around 4%, and the USD/VND exchange rate may fluctuate by 4-5% in 2024," the representative added.

Suan Teck Kin, head of global market and economic research at UOB Group, believes that the recent weakening of the VND due to the strengthening USD may make the State Bank of Vietnam cautious in any changes to policy interest rates.

The forecast is that the USD exchange rate will remain at 24,600 VND /USD in the second quarter of 2025.

Commenting on exchange rate fluctuations in the first six months of the year, UOB stated that this development was entirely within the general trend. Over the past six months, the Japanese yen depreciated by 14%, the South Korean won by 7%, and the Thai baht also depreciated against the USD.

Central banks must intervene in the market in an effort to stabilize the macroeconomy and limit capital outflows. Vietnam has integrated deeply into the international market, and the regulatory authorities must act accordingly.

UOB maintains its view that the US Federal Reserve (Fed) will cut USD interest rates twice this year, possibly in September and December, each time by 0.25%. If this forecast materializes, it would provide a favorable basis for other economies to consider cutting or not raising their policy interest rates.

Pressure on the exchange rate will also be eased. However, it should also be noted that there is a very high probability that USD interest rates will remain high for a longer period in the next few years.

Regarding the forecast for the VND/USD exchange rate trend in the near future, Mr. Suan Teck Kin stated that with UOB's prediction that the Fed will cut interest rates in September and December this year, UOB sees the possibility of the USD depreciating in the second half of the year.

"Our view is that the VND could recover in the second half of 2024 along with the recovery of the CNY and the broader weakening of the USD as the Fed cuts interest rates. We expect the VND to gradually strengthen against the USD."

"The exchange rate could be at VND 25,200/USD in Q3 2024, VND 25,000/USD in Q4 2024, VND 24,800/USD in Q1 2025, and VND 24,600/USD in Q2 2025," Suan Teck Kin predicted.

"We recommend that businesses and individuals with legitimate foreign exchange trading needs should research, analyze, and utilize exchange rate and interest rate risk hedging products and tools appropriately to optimize their business and investment operations," UOB shared.

In addition, Mr. Suan Teck Kin also advised businesses to have a reasonable and balanced plan for holding both foreign and domestic currencies. It is crucial to have appropriate risk mitigation policies, maintain balance, and have a sound plan for cash flow and the level of holdings in both foreign and domestic currencies.

Source: https://tuoitre.vn/lai-suat-huy-dong-di-len-ti-gia-se-bot-cang-tu-quy-3-20240719114303861.htm