Want to be in the loop?
subscribe to
our notification
Business News
PREVIOUS FINANCIAL CRISES THUS FAR AVERTED VIA STABLE MOVES
The increase of the central exchange rates and adjustment of the exchange rate band of the State Bank of Vietnam are suitable with the trends of other currencies at a lighter level.
The State Bank of Vietnam (SBV) last week adjusted the USD to VND exchange rate from ± 3 per cent to ± 5 per cent.
Economist Le Xuan Nghia said that the threshold of the foreign currency market had been at ± 5 per cent in the past to create a wide trading space up to a 10 per cent margin, so the move was not hugely significant.
“Due to the unstable issues in the 2008/2009 financial crisis, the SBV lowered the amplitude to ± 3 per cent. However, the rise of the central rate is the key point, while the amplitude widening is not particularly special,” said Nghia.
The domestic foreign exchange market has witnessed sharp movements in recent years – for example, the USD/VND exchange rate increased by 2.4 per cent in the third quarter. The unfavourable movement of the international environment was the main factor putting pressure on the domestic exchange rate.
The US Federal Reserve has continuously hiked the basic interest rate, by 150 points in the third quarter. Besides this, the cash flow is paying more attention to the US dollar as a safe currency amid the Russia-Ukraine conflict, the energy crisis in the Eurozone, and the nascent global recession.
Domestic foreign currency supply has continued a negative trend since the beginning of the year, with an estimated deficit of nearly $10 billion in the third quarter, while foreign currency demand tended to increase strongly.
Economist Nghia said that this context was not the same as the economic crisis in 2008 that broke the banking system and that the recovery would come soon if everything became stable and the value of the US dollar would fall a little.
“The increase of the central exchange rate and the adjustment of the exchange rate band by the SBV is also in line with the general trend of other currencies, but at very light adjustment. The VND depreciated by about 7 per cent, much lower than other countries thanks to the policies of the SBV,” said Nghia.
In the third quarter, the SBV adjusted selling rates three times at 3 per cent to VND23,925 and sold foreign currency to the market, at about $9 billion. The VND-USD swap rate difference also rose sharply to around 2 per cent.
The adjustment is deemed to benefit exporters and maintain the stability of the current account, while importers can be negatively affected.
With the Fed likely to continue strong tightening, raising the operating interest rate by about 125 points to around 4.4 per cent, the chance of a recession in the Eurozone is increasing due to the energy shortage crisis.
Moreover, domestic supply and demand are unlikely to improve soon because the demand for foreign currency sends profits back home to other countries, loan repayment tends to increase at year-end, and risks from the international environment are large enough for businesses and individuals to hold US dollars.
A BIDV leader expects that the increase of the domestic exchange rate will slow down thanks to the flexible regulatory policies of the SBV. “The SBV will try to stabilise the market and hold the exchange rate by not letting it rise too high. The VND-USD interest rate differential will likely continue to be moderated to a positive level with the expectation at around 2.5-3.5 per cent for the average of one-week term,” he said.
Economist Nghia added, “The US dollar has been going up consecutively for a year, its index has increased by 16-17 per cent, and the value of the US dollar has appreciated against others. US dollar has been on top and now poses a danger to the US economy, so experts predict that the US dollar will depreciate and cannot increase further.”
Even if the US raises interest rates and the rise of the US dollar slows and then goes down, the exchange rate will fluctuate between 7-8 per cent by the end of the year.
Source: VIR
Related News
DIGITAL TRANSFORMATION IN LOGISTICS – A KEY TO UNLOCKING SUSTAINABLE E-COMMERCE AND ECONOMIC DEVELOPMENT
Accelerating digital transformation in logistics is critical in order to promote the sustainable development of e-commerce, a conference on applying technology held by the Ministry of Industry and Trade heard on Thursday, as well as accelerating overall economic growth.
SOILBUILD EXTENDS ITS HORIZONS INTO VIETNAM INDUSTRIAL REAL ESTATE
Soilbuild Group, an integrated real estate group, has broadened its investment in industrial real estate to Vietnam through its Soilbuild International division. The official launch of Soilbuild International (Vietnam) took place in Hanoi on May 9th, 2024, and was attended by esteemed guests, including domestic and international partners.
SEMINAR: BUSINESS SPOTLIGHT - THE HONG KONG-INSPIRED PRESENCE NESTLED IN THE HEART OF HANOI'S EAST
16h00 - 18h00, Wednesday (May 22nd, 2024)Almaz Convention Center - Hanoi (GG map: https://maps.app.goo.gl/YtWyGgkiTwWvFnfX6)
VIETNAM SECURES REMARKABLE ECONOMIC SUCCESSES SINCE NATIONAL REUNIFICATION
Since the national reunification on April 30, 1975, Vietnam has obtained admirable economic achievements and is now on its way to become the 20th largest economy in the world. Back to 1975, Vietnam, torn by two major wars, was a backward economy dependent on agriculture and foreign assistance. Foreign loans and aid accounted for over 63 percent of its budget.
350 EXHIBITORS TO TAKE PART IN HCM CITY PAPER, COATINGS, RUBBER, PLASTIC EXPOS
They will have a total display area of 10,000sq.m, 30 per cent more than last year, and the participation of over 350 local and international exhibitors who will showcase thousands of products and technologies.
INT’L INVESTORS EYE VIETNAM’S DATA CENTER MARKET – REPORT
Vietnam’s data center market is increasingly attractive to foreign investors, driven by the country’s expanding digital economy, rising data consumption, and supportive government policies, said a new report by JLL. While Vietnam’s data center sector has traditionally been dominated by local telecommunications companies, global players are now entering the market.