With the developments of USD in the world and domestic exchange rates, experts believe that USD will be the least attractive investment channel this year. The leader of the State Bank of Vietnam (SBV) recommends that people should not hoard foreign currency, but "boldly sell it to the bank".
With the developments of USD in the world and domestic exchange rates, experts believe that USD will be the least attractive investment channel this year. The leader of the State Bank of Vietnam (SBV) recommends that people should not hoard foreign currency, but "boldly sell it to the bank".
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| Businesses need to proactively develop plans to respond to exchange rate fluctuations. Photo: Duc Thanh |
Exchange rate remained unchanged in the first 3 months of the year
As of last weekend, the domestic VND/USD exchange rate had only increased by about 0.6% compared to the beginning of the year. Compared to the USD's movements in the world (down 4.8% compared to the beginning of the year), the domestic exchange rate cooled down somewhat more slowly. However, with the recent interest rate developments, keeping the exchange rate steady in the first 3 months of the year was a great effort by the operator.
Dr. Can Van Luc, Chief Economist of BIDV, said that in 2025, the exchange rate will be supported by a trade surplus of about 20-25 billion USD, realized foreign investment capital will increase by about 18%, remittances will grow steadily... Accordingly, this year's exchange rate will only increase by about 3%, instead of nearly 5% in 2024.
“Last year, VND depreciated by nearly 5% mainly due to the strong increase of USD in the international market, but this year the situation is different. Risks in trade policy and tariffs have slowed down US consumption, weakened US macro indicators... leading to a decrease in the USD Index. In addition, this year, the US Federal Reserve (Fed) is likely to cut interest rates twice more. The domestic exchange rate this year is basically not under much pressure, increasing by only about 3-4% for the whole year,” Dr. Luc commented.
According to analysts, the USD is still on a weakening trend due to uncertainties related to China's growth and US tariff policies. In addition, the strong growth prospects of the Vietnamese economy and the Government's commitment to maintaining exchange rate stability also reduce expectations for the exchange rate.
However, experts still recommend that businesses proactively develop plans to cope with exchange rate fluctuations. According to Mr. Dinh Duc Quang, Director of Currency Trading, UOB Vietnam Bank, businesses should develop a tight cash flow management plan, including the reasonable use of exchange rate and interest rate risk hedging tools, to minimize investment and business costs.
Support liquidity, do not let interest rate reduction put pressure on exchange rate
To support the economic growth target of 8% or more this year, the State Bank of Vietnam is directing the banking sector to reduce lending rates and expand credit more than last year. Normally, when interest rates decrease, the exchange rate will be under upward pressure. However, recently, the exchange rate has remained stable, despite the continuous decline in interest rates.
- Mr. Le Duy Binh, CEO of Economica
However, this year, Vietnam's growth prospects are very bright thanks to the Government's determination, especially the growth of the export sector and the foreign investment sector. In addition, the State Bank of Vietnam has also shown its determination to keep the exchange rate stable. Therefore, I believe that this year's exchange rate fluctuations will not be as large as last year.
Associate Professor, Dr. Nguyen Huu Huan (Ho Chi Minh City University of Economics) said that the reason for this situation is because the State Bank has had many activities to support liquidity in the open market, thereby neutralizing pressure on the exchange rate.
In fact, since March 5, the State Bank has stopped withdrawing money from the treasury bill market. Instead, the State Bank has switched to injecting more liquidity into the system, with a longer injection period (up to 3 months), in order to provide a stable source of capital for commercial banks. This has caused VND interest rates to decrease, but the exchange rate has not been under pressure.
Another reason why the exchange rate is not under pressure is that interbank interest rates are still anchored high, despite the SBV's net injection. As of the end of last week (March 14), the interbank interest rate for overnight loans was at 4.3%. Thus, the VND and USD interest rates are approximately the same, preventing credit institutions from speculating on foreign currencies.
Deputy Governor of the State Bank of Vietnam Dao Minh Tu said that in the near future, the State Bank of Vietnam will have more solutions to help the Big 4 group reduce costs, thereby further cutting interest rates. Currently, this group holds nearly 50% of the market share of mobilization and lending. Once the Big 4 group deeply reduces interest rates, the interest rate level of the whole market will decrease accordingly.
Regarding the exchange rate, Deputy Governor Dao Minh Tu affirmed that this year, with the available resources (existing foreign exchange reserves and optimistic prospects for exports, foreign investment, and remittances), the State Bank of Vietnam is confident that it will maintain a stable exchange rate. Therefore, people should not hoard or speculate in foreign currencies. "There is no need to keep foreign currencies at home or in accounts, feel free to sell them to banks," the Deputy Governor recommended.
Although the exchange rate is being committed by the operator and is also supported by many factors, experts still warn of risks if Vietnam is considered by the US as a transit point for goods of other countries and subject to high taxes. Accordingly, Vietnam should be cautious with its temporary import and re-export policy, as well as actively diversify its markets to avoid tariff risks.
Source: https://baodautu.vn/usd-co-the-la-kenh-dau-tu-kem-hap-dan-nhat-d254431.html
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