Interest rates increase, exchange rates will be less tense from the third quarter

Mr. Suan Teck Kin, director of global market and economic research, UOB Group, said that pressure on exchange rates will gradually decrease in the last months of the year, while deposit interest rates will increase slightly - Photo: AH

Interest rates continue to increase

UOB Bank has just announced its business outlook study for 2024. At the announcement, a representative of UOB Bank Vietnam said that since the beginning of the year, banks' deposit interest rates have increased by about 0.5-1% per year.

However, current interest rates are still lower than the period before the COVID-19 pandemic. For terms under 6 months, the mobilization interest rates are still lower than the prescribed ceiling.

"We forecast that the VND interest rate level in the last 6 months of the year may continue to increase slightly by 0.25-0.75%/year, creating a harmonious interest rate curve for terms from 1-12 months.

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

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

USD price forecast to be 24,600 VND /USD in the second quarter of 2025

Commenting on the exchange rate fluctuations in the first 6 months of the year, UOB said that this development was completely in line with the general trend. In the past 6 months, the Japanese Yen lost 14% of its value, the Korean Won lost 7% of its value, and the Thai Baht also lost value against the USD.

Central banks have had to intervene in the market in an effort to stabilize the macro economy and limit foreign capital outflows. Vietnam has deeply integrated into the international market and the management agency has had to act similarly.

UOB is maintaining 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 the reality plays out as this forecast, this will be a favorable basis for other economies to consider cutting or not needing to increase policy interest rates anymore.

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

Forecasting the trend of the VND exchange rate against the USD in the coming time, Mr. Suan Teck Kin said 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 a CNY recovery and broad USD weakness as the Fed cuts rates. We expect the VND to gradually strengthen against the USD.

The exchange rate could be at 25,200 VND/USD in the third quarter of 2024, 25,000 VND/USD in the fourth quarter of 2024, 24,800 VND/USD in the first quarter of 2025 and 24,600 VND/USD in the second quarter of 2025," said Mr. Suan Teck Kin.

"We recommend that businesses and individuals who have a need to legally buy and sell foreign currencies should research, analyze and use products and tools to hedge exchange rate and interest rate risks appropriately to optimize their business and investment operations," UOB shared.

In addition, Mr. Suan Teck Kin also gave advice to businesses on having a reasonable and balanced plan in holding both foreign and local currencies. It is important to have a suitable risk prevention policy, maintain balance and plan properly on cash flow and holding levels of both foreign and local currencies.

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