USD/VND exchange rate has the most "crazy" week of 2023
After a long period of “giving” the heat to major financial markets such as gold and stocks, the foreign exchange market suddenly recorded a week of extremely strong fluctuations in the USD. In other words, the USD had the “most chaotic” week of 2023 when there were consecutive strong increases and deep decreases.
Right from the first session of the week (July 3), the USD exchange rate increased sharply. The heat was continuously built up and the USD reached its "peak" on July 5, the exchange rate approaching the mark of 24,000 VND/USD.
However, when the important milestone of 24,000 VND/USD had not been conquered, the USD suddenly "fell downhill" at a very high speed. At the end of the week, the USD/VND exchange rate decreased sharply compared to the "peak" but still increased significantly compared to the end of last week.
Specifically, at the Joint Stock Commercial Bank for Foreign Trade of Vietnam – Vietcombank, after 3 consecutive days of strong increases, the USD reached 23,920 VND/USD for selling. However, at the end of the week, the USD stopped at 23,470 VND/USD – 23,810 VND/USD, down 110 VND/USD for both buying and selling compared to the “peak” but still up 60 VND/USD compared to the end of last week.
The USD exchange rate had its most turbulent week of 2023 with consecutive strong increases and deep decreases. It is forecasted that the VND will still face a lot of pressure ahead. Photo: Getty Images
The exchange rate at Vietnam Joint Stock Commercial Bank for Industry and Trade - VietinBank "closed the week" at 23,430 VND/USD - 23,850 VND/USD, down 115 VND/USD compared to the session on July 5 but up 50 VND/USD compared to the session on June 30.
Vietnam Export Import Commercial Joint Stock Bank – Eximbank listed the USD/VND exchange rate at the end of the week at: 23,490 VND/USD – 23,800 VND/USD, down 110 VND/USD compared to July 5 but up 50 VND/USD for buying, up 60 VND/USD for selling compared to the end of last week.
Facing many difficulties but the dong remains stable
Mirae Asset Securities Company assessed that in the short term, the USD/VND exchange rate is expected to be under increasing pressure due to the mismatch in monetary policy when Vietnam has been applying a loose monetary policy to support the economy to overcome the current difficult period while the US continues to maintain the target of controlling inflation.
Mirae Asset commented that the US Federal Reserve (FED) paused its interest rate hikes at its June meeting after 10 consecutive hikes; however, according to the Federal Open Market Committee (FOMC) economic projection summary, there could be two more rate hikes, each of 25 basis points, in the second half of 2023.
Inflation in the US continues to cool. Specifically, both the US inflation index and the personal consumption expenditures (PCE) price index continued to decline sharply in May to 4% and 3.8% YoY, respectively, partly due to comparisons with a high base in the same period and due to cooling energy prices. Inflation figures for June, due to be released on July 12, may show continued deflation, compared with the peak in the same period.
However, the core PCE index (energy and food prices) in May increased by 4.6% year-on-year – this could be the basis for the FED to continue raising interest rates at the July meeting. According to data from the CME FedWatch tool, the probability is high that the FED will increase by 25 points at the FOMC meeting on July 27 to 5.25 – 5.5%.
In Marie Asset’s view, although inflation remains well above its 2% target, the Fed is moving closer to the end of its tightening cycle as it considers the additional policy lag that will allow the US economy to achieve a successful soft landing. The next phase will be to keep interest rates at that high level while closely monitoring incoming economic data (especially unemployment and inflation).
In the coming time, the USD index is expected to continue to maintain around 101-105 points with the prospect that the FED will soon stop the interest rate hike cycle, which will help reduce pressure on the USD/VND exchange rate.
“Overall, we expect the VND to remain stable against the USD due to Vietnam’s advantage in trade surplus (1H2023: USD 12.25 billion), stable disbursed FDI inflows (1H2023: over USD 10 billion), as well as well-regulated system liquidity,” Mirae Asset commented.
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