Illustrative image. (Photo: stockbiz.vn)Specifically, the State Bank of Vietnam (SBV)’s central rate ofthe Vietnamese dong againstthe US dollar was adjusted up 0.7% in January 2024 to 24,036 VND per dollar.
The exchange rate on the interbank market in the month alsoincreased by 1.4% compared to the end of 2023 to 24,611 VND per dollar, thehighest level since the end of November 2022.
The dollar buying and selling exchange rate listed by Vietcombankis currently at 24,395 VND and 24,765 VND per dollar, respectively, an increaseof nearly 1.4% since the beginning of this year and only about 0.5% lower thanthe historical peak recorded in the end of October 2022.
Exchange rate fluctuations in the free market are similar to theofficial market. The dollar selling rate on the market reached a record high of25,120 VND per dollar at the end of last week before cooling down to 25,035 VNDper dollar on January 29.
Analysts attributed the USD/VND exchange rate increase in Januaryto the influence of the escalating developments of the greenback in theinternational market and an overly high gap between dollar and dong interest rates.
In a newly published report, Viet Dragon Securities Company (VDSC)said that the current devaluation of the dong against the dollar is due to the dollar and dong interest rategap still being very large, at approximately 5% in January.
However, analysts from KB Securities Company (KBSV) believed therecent increase in the USD/VND exchange rate has not forced the SBV tointervene to stabilise the exchange rate. It explained that the SBV usuallyintervenes when the exchange rate increases by at least 2%. The interbankexchange rate is also still far from the SBV’s selling rate of around 25,187VND per dollar. Besides, in the context of stable low inflation, the SBV’scurrent monetary policies still prioritise lowering interest rates to stimulateeconomic growth.
In case the USD/VND exchange rate increases more than 3% from thebeginning of this year - corresponding to Dollar Index (DXY) around 108 - KBSVbelieved that the possibility of the SBV intervening to stabilise the exchangerate is feasible. However, the KBSV’s analysts do not expect this scenariobecause DXY's room for further growth is quite limited given the expectationthat the US Federal Reserve (Fed) will lower interest rates in 2024.
KBSV expected the USD/VND exchange rate to be more stable in 2024and to increase by 1.5% to reach 24,600 VND per dollar in the year thanks to anoverall balance surplus of 7-10 billion USD in 2024 in the wake of positive FDIinflows and remittances, and a reduction in the balance finance deficit. Inaddition, the Fed's interest rate cut this year will help narrow the negativeinterest rate gap between dollar and dong./.
VNA
