Free market jumps over 25,000 VND
Yesterday (January 24), the USD price at commercial banks continued to fluctuate in an upward trend. For example, early in the morning, Eximbank bought USD in cash at 24,340 VND and sold at 24,730 VND, then in the early afternoon, this bank continued to raise the buying price to 24,380 VND and sold at 24,770 VND. Similarly, Vietcombank bought USD in cash at 24,365 VND in the early morning, then increased to 24,400 VND in the afternoon; sold from 24,735 VND to 24,770 VND... In just one day, the USD price at commercial banks increased by 40 - 50 VND. Compared to the first day of the year, the USD price at commercial banks increased by 350 VND, equivalent to an increase of more than 1.4%.
At some foreign exchange points in Ho Chi Minh City, the USD price has also increased rapidly in recent days. On the afternoon of January 24, the free USD price continued to be bought at 25,000 VND and sold at 25,100 VND, unchanged from the beginning of the day. However, compared to the beginning of the year, the free USD price has increased by 400 VND, equivalent to an increase of more than 1.6%.
USD price continues to increase in the first days of 2024
Thus, after a long period of cooling down, the domestic USD price has continuously increased in the first 2 weeks of the new year due to the main influence of the increase in the price of this currency on the world market. The USD-Index jumped from 101.38 points on the first day of the year to over 103 points and has been above this threshold for many days. Currently, the USD-Index is maintaining around 103.3 points, up nearly 2 points compared to the beginning of the year and the highest in the past month. The USD is estimated to have increased by about 1.8% compared to the beginning of the year. However, the greenback's increase has also fluctuated continuously as investors are still only predicting when the US Federal Reserve (Fed) will start cutting interest rates.
The strong increase of the USD means that other currencies have decreased. Not only VND but also key currencies have decreased sharply compared to USD such as Japanese Yen decreased by about 2.2% last week; Euro decreased by 0.5% or Thai Baht decreased by 1.8%, Dong, Won (KRW) of Korea decreased by 1.9%... Since the beginning of the year, most currencies in the Asian region have recorded a decrease of 3 - 5% compared to the end of 2023.
Financial economist, Associate Professor, Dr. Dinh Trong Thinh said that the continuous increase in the USD/VND exchange rate in the first days of the new year is both cyclical and affected by the international market. Domestically, at the end of the year, due to increased import and export activities, the demand for foreign currency of enterprises usually increases. Some companies even have a defensive mentality, hoarding more cash to make transactions during the Lunar New Year holidays when the banking system stops trading.
In addition, the interest rate gap between VND and USD has narrowed but still remains. Moreover, the world USD price has continuously increased in recent days as investors no longer have strong expectations that the Fed will soon reduce interest rates as before. A series of data shows that US economic activity is still recovering despite interest rates at the highest level in decades, causing the market to reduce expectations of interest rate cuts starting from next March. According to Associate Professor, Dr. Dinh Trong Thinh, this increase is not too large and not worrisome in the current context for Vietnam.
Exchange rate fluctuations in 2024 will be below 3%
Although the USD/VND exchange rate has increased rapidly beyond forecasts in recent days, economic and financial experts all believe that there will not be much fluctuation. At the same time, this trend will also quickly reverse. In particular, the current macroeconomic situation in Vietnam is quite stable, ensuring the supply of foreign currency for the import and export needs of businesses. By the end of 2023, the amount of remittances to Ho Chi Minh City was recorded at more than 9.5 billion USD, an increase of 43.3% compared to 2022. This is the highest growth rate in the past 5 years and continues to maintain a high proportion.
Ho Chi Minh City's remittances often account for more than 50% of the country's total remittances. According to some experts, although Vietnam's remittances last year have not returned to the level of more than 19 billion USD as in 2022, this is still a fairly high number. At the same time, foreign direct investment (FDI) in Vietnam last year grew positively, reaching 36.61 billion USD, an increase of 32.1% compared to 2022. Many organizations assess that FDI flows will continue to be positive this year when Vietnam's position has improved; transport infrastructure has improved positively because the Government has increased public investment or the possibility of upgrading the stock market from a frontier to an emerging market...
Associate Professor, Dr. Dinh Trong Thinh commented that the current fluctuations in the exchange rate in Vietnam are not large and there is no possibility of sudden changes throughout the year. Currently, with a trade surplus, remittances and FDI capital still increasing, it shows that the State Bank has enough resources to stabilize the foreign exchange market. However, the increase in the first 2 weeks of this year is normal, so there is no need for intervention from the management agency. After the Lunar New Year holiday in 2024, the exchange rate will soon stabilize again.
According to this expert, the Fed has predicted that there will be 3 interest rate cuts throughout 2024. Therefore, although it is not yet possible to determine when this agency will start to reduce interest rates, the trend of the USD will still be downward. This causes the pressure on Vietnam's exchange rate to disappear and the domestic USD's fluctuations will remain at a normal level of less than 3%/year.
Sharing the same view, economist Vo Tri Thanh said that the Fed has recently been more hesitant in cutting interest rates. That has caused the market's expectation that the agency will cut from March to decrease sharply. This has also pushed the USD on the international market to increase rapidly, causing pressure on the exchange rate in Vietnam. In addition, domestic demand at the end of the year and before the Lunar New Year often increases more than usual months, so it is understandable that the USD price has increased. But that has not had any impact on the exchange rate policy or the economy in general. With the amount of remittances to Vietnam increasing and the trade surplus still existing, controlling Vietnam's exchange rate is still in the plan. There will be times when Vietnam still has to accept exchange rate fluctuations with a stronger amplitude, but the overall fluctuations in 2024 will not be too large.
A series of securities companies predict that the USD will tend to depreciate in 2024. For example, MBS Securities Company predicts that this year, when global monetary policy begins to loosen, the USD will tend to depreciate widely, which will reduce pressure on the domestic exchange rate. The exchange rate in 2024 will fluctuate in the range of 23,800 - 24,300 VND/USD and will continue to be supported by factors including trade surplus, import-export recovery, positive FDI disbursement, stable remittances, strong recovery of international tourism, etc. In a newly published macro report, regarding exchange rates, Techcombank's analysis team predicts that the USD/VND exchange rate will move sideways in the first half of the year and tend to decrease slightly by 2% in the second half of the year when the USD-Index is forecast to decrease by the end of 2024. Yuanta VN Securities Company expects that the exchange rate pressure will decrease significantly in the coming time due to a good trade surplus; FDI into Vietnam is still increasing; the end of the year - near Tet will be the peak season for remittances to Vietnam and the USD will weaken in the international market...
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