The Vietnamese dong has strengthened against the U.S. dollar after hitting a peak in late July, with the exchange rate now at its lowest level in several months.
On Monday, the State Bank of Vietnam (SBV) set the central exchange rate at 24,251 dong per dollar, marking a continued decline from last weekend. Commercial banks have reported four consecutive weeks of dollar depreciation since July 22.
At major commercial banks, the dollar is currently being sold within the range of 25,080 to 25,160 dong.
Vietcombank, the largest foreign currency trader in Vietnam, quoted the buying and selling prices at 24,710 and 25,080 dong per dollar, respectively. Since the beginning of August, the dollar price at Vietcombank has dropped by approximately 350 dong, or 1.3 per cent.
The U.S. dollar has consistently weakened at domestic commercial banks, with rates significantly below the ceiling set by the central bank.
According to SBV data, the Vietnamese dong depreciated nearly 5 per cent against the dollar in early 2024. However, by early August, the depreciation had eased to 3.85 per cent.
In the informal market, the dollar, which once surged to 26,000 dong, has sharply declined and is now trading at around 25,350 to 25,430 dong, the lowest level since March.
The exchange rate's easing comes as the U.S. dollar shows signs of weakening amid expectations of monetary easing by the U.S. Federal Reserve.
The trend is expected to continue. The DXY index, which tracks the dollar against six major currencies, fell by 0.71 per cent to 102.4 points last week, following forecasts that the Fed will make a significant interest rate cut next month, coupled with recent economic data and market instability in the United States.
MB Securities Company (MBS) anticipates that exchange rate pressure will ease, with the dollar fluctuating around 25,300 dong for the rest of 2024, supported by positive factors such as a trade surplus, record FDI disbursements of over $12.5 billion, and a strong rebound in tourism.
MBS analysts believe that macroeconomic stability is likely to be maintained and further improved, which will support exchange rate stability throughout the year.
Shinhan Bank Vietnam expects the dong to recover as the Fed shifts its monetary policy, alongside increased public investment and FDI inflows into Vietnam. Shinhan forecasts that the average exchange rate in 2024 could reach around 25,040 dong per dollar.
The easing exchange rate is a positive development for Vietnam's economy, providing the SBV with more room to maintain its accommodative monetary policy.
Since the beginning of the year, the central bank has taken several measures to stabilize the exchange rate, including raising treasury bill rates and selling foreign currency.
During periods of exchange rate tension, there was speculation that the SBV might raise its policy rates. However, the most challenging phase now appears to be over.
On August 5, the SBV cut both the OMO rate and the treasury bill rate by 0.25 per cent, aiming to support system liquidity and ease interbank market interest rates.
“This reflects the SBV's confidence in controlling the exchange rate and its readiness to implement supportive monetary policies when opportunities arise,” Phu Hung Securities said in a note.
KB Securities Vietnam forecasts that while there may be fluctuations in the third quarter, the exchange rate is expected to gradually decline in the fourth quarter, reaching 25,120 dong per dollar.
This level would represent a 3.5 per cent increase from the start of the year, close to the SBV’s target of 3 per cent, and remains reasonable compared to rate increases in other regional countries.
Tags:
Tags:
VPBankS has identified four major commercial banks that meet the criteria for credit limit expansion.
Vietnam's deposit interest rates may see a slight increase in the second half of the year as the economy shows clear signs of improvement, according to banking experts.
