USD/VND exchange rate fluctuates around 3% annually

NDO - According to Mr. Dinh Duc Quang, Director of Currency Trading Division (UOB Vietnam Bank) on exchange rates, on the basis of Vietnam continuing to ensure large balances, trade surplus, attracting foreign investment, remittances and tourism growth will support the USD/VND exchange rate to fluctuate around 3% annually.

In the early days of November 2024, the market recorded an increase in interbank VND interest rates compared to the relatively low average trading level in October; at the same time, the USD/VND exchange rate in the past few weeks also increased again, almost reaching its highest level in mid-2024.

“We believe that these developments are quite similar to the recent intense fluctuations in the global foreign exchange and currency markets from major events such as the conflicts in Ukraine and the Middle East that have shown no signs of cooling down, the unclear forecast of election results in the world's largest market, the difference in economic growth rates between major economies... leading to many trends of shifting and diversifying asset and investment risks,” said Mr. Dinh Duc Quang.

According to Mr. Quang, from a global perspective, US economic data remains surprisingly strong compared to other major economies despite USD interest rates remaining at two-year highs. The USD fell in value in September after the US Federal Reserve cut interest rates by a whopping 50 basis points, but in October, the greenback almost regained all of its lost value after solid economic data was released (economic growth, solid new jobs and falling inflation).

In the domestic market, in such a context, the State Bank of Vietnam has intervened to stabilize the markets. “When the USD/VND exchange rate increased quite strongly, the Management Agency issued treasury bills to absorb excess liquidity from the market to reduce exchange rate pressure. Foreign exchange transaction data in the past few months shows that there has been a relatively large demand to buy foreign currency from the State Treasury, along with the Treasury reducing the amount of VND deposits in the commercial banking system. And when the market needs more VND liquidity, the Management Agency has pumped support through the open market channel,” analyzed a UOB Vietnam banking expert.

Mr. Dinh Duc Quang.

According to reference data as of the end of November 4, the balance of issued treasury bills was about VND80 trillion (absorption channel) while the balance of liquidity injection through the open market was VND50 trillion (injection channel). “Thus, the Management Agency has been using market stabilization tools in harmony and shows that there is no liquidity shortage in the market. The interest rates for mobilizing deposits from individuals and businesses at commercial banks were kept stable in October and early November, also confirming that the market has no signs of liquidity shortage,” said Dinh Duc Quang, Director of the Monetary Business Division (UOB Vietnam Bank).

Forecasting the exchange rate and interest rate developments in the coming time, UOB experts continue to make forecasts based on the fundamental factors and good potential for the Vietnamese economy in 2024 and 2025. Specifically, regarding interest rates, it is forecasted that the Management Agency will not adjust policy interest rates (refinancing interest rates, rediscount interest rates, deposit interest rate ceilings) and will continue to flexibly use commercial intervention interest rates (interest rates on treasury bills, open market operations (OMO) interest rates) to maintain the short-term 3-month mobilization level around 3-4% and the long-term 12-month level at 5-6%.

Regarding exchange rates, on the basis of Vietnam continuing to ensure large balances, trade surplus, attracting foreign investment, remittances and tourism growth will support the USD/VND exchange rate to fluctuate around 3% annually, in which the 4th quarter of 2024 is 25,200 USD/VND, the 1st quarter of 2025 is 25,000 USD/VND, the 2nd quarter of 2025 is 24,800 USD/VND and the 3rd quarter of 2025 is 24,600 USD/VND.

“We also believe that the US election results will have little direct impact on VND interest rates and the USD/VND exchange rate because the domestic currency has been and is being tightly managed within the framework of long-term trade and investment activities rather than as a short-term investment and speculation tool,” said Mr. Dinh Duc Quang.

Source: https://nhandan.vn/ty-gia-usdvnd-bien-dong-quanh-muc-3-hang-nam-post843230.html