USD/VND exchange rate may reach 26,000 VND, interest rates at risk of increasing again

USD/VND exchange rate exceeds 24,600 VND/USD

In recent days, the financial market has witnessed a clear opposite trend of interest rates and exchange rates. While interest rates have continuously decreased and even broken the 6%/year mark for 12-month terms, the USD/VND exchange rate has increased hourly and surpassed the 24,600 VND/USD mark.

Orient Commercial Joint Stock Bank is the unit with the highest selling price of up to 24,681 VND/USD, an increase of 28 VND/USD compared to the end of yesterday. The buying price at this bank reached 24,211 VND/USD.

The Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) buys and sells USD at: 24,220 VND/USD - 24,520 VND/USD, up 20 VND/USD. At the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), the exchange rate remains unchanged, trading at: 24,190 VND/USD - 24,530 VND/USD.

USD VND exchange rate can reach 26000 VND, interest rate is at risk of increasing again, image 1 — The USD/VND exchange rate is “heating up” every day and is forecast to reach 26,000 VND/USD. In that context, interest rates are at risk of rising again. Illustrative photo

At Vietnam Export Import Commercial Joint Stock Bank (Eximbank), the USD/VND exchange rate is listed at: 24,230 - 24,550, an increase of 10 VND/USD in both buying and selling directions.

The buying and selling prices of USD at Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) have had opposite developments. The exchange rate at VietinBank is listed at: 24,216 VND/USD - 24,556 VND/USD, up 46 VND/USD for buying but down 34 VND/USD for selling.

It can be seen that in the banking system, the USD selling price has simultaneously exceeded 24,500 VND/USD. OCB is a special case when the exchange rate exceeded 24,600 VND/USD and headed towards a high of 24,700 VND/USD.

The central exchange rate of VND against USD applied for September 19, 2023 is listed by the State Bank at: 24,060 VND/USD, an increase of 14 VND/USD compared to yesterday. The exchange rate applied for September 19, 2023 is 23,400 VND/USD - 25,213 VND/USD.

In the free market, the USD/VND exchange rate also continues to increase, but the rate of increase is still slower than the banking system, so the gap between the two markets is getting bigger.

At Hang Bac and Ha Trung, the “foreign currency streets” of Hanoi, the exchange rate is commonly traded at 24,280 VND/USD – 24,380 VND/USD, a slight increase compared to the end of yesterday. At each different store, the difference is about 10 VND/USD.

USD may reach 26,000 VND, interest rates at risk of increasing again

Dr. Nguyen Tri Hieu, a banking and finance expert, said the reason for the sharp increase in the USD/VND exchange rate over the past time is the contrast between VND interest rates and USD interest rates.

Currently, the US Federal Reserve (FED) is still leaving open the possibility of continuing to increase USD interest rates. This will be announced in the upcoming meetings of the world's leading central bank.

Meanwhile, after many interest rate cuts, the State Bank still wants to reduce further, causing the interest rate gap between the VND and USD to become larger and larger. This is the main reason why the USD is stronger than the VND.

Second, according to Dr. Nguyen Tri Hieu, the current domestic economy is still stagnant, which also negatively affects the value of the dong and pushes the dong down. These factors combine to push the exchange rate up.

“In my opinion, the USD/VND exchange rate could increase to 25,000 VND/USD, or even 26,000 VND/USD,” Dr. Nguyen Tri Hieu predicted for the exchange rate.

Mr. Hieu analyzed that the increase in exchange rate will affect monetary policy and exchange rate. If the exchange rate increases sharply, it will be disadvantageous for imports because the price of goods in USD will increase if converted to VND, thereby causing high inflation.

At the same time, rising exchange rates will put pressure on interest rates to rise again.

“If the FED increases the USD at the upcoming meeting, the VND interest rate will at least stop decreasing, and may even increase again. However, the increase will not be high, reaching about 0.25%. However, the overnight interest rate will reach a high of 5.5% or 5.75%,” Mr. Hieu commented.

According to the CME FedWatch tool, the money market expects the Fed to keep interest rates unchanged at its upcoming meeting, although this could change in subsequent meetings.

“The market will be looking for any signs that the Fed may be leaning toward another rate hike later in the year or that a longer pause is needed,” said Erik Weisman, chief economist and portfolio manager at MFS Investment Management.

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