Is the surge due to international influence?
Most forecasts suggest that the USD/VND exchange rate will remain stable in 2024. However, since the beginning of this year, the market has witnessed significant fluctuations in the exchange rate. In the last week of January, the US dollar was sold on the free market at a price of over 25,000 VND, reaching a record high of 25,120 VND, marking an increase of 350 VND, equivalent to a 1.4% increase compared to the end of 2023.
Similarly, the USD price on the official market has also been volatile, with the central exchange rate of USD/VND at times recording an increase of 150 VND, equivalent to a more than 0.6% increase. The selling price of USD at the State Bank of Vietnam (SBV) exchange reached an increase of more than 180 VND in the middle of January, equivalent to a more than 0.7% increase compared to the beginning of the year. Meanwhile, the trading price at commercial banks also increased by approximately 350 VND, equivalent to a more than 1.4% increase compared to the beginning of the year.
The resurgence of the USD in the international market is seen as the driving force behind the surge in the USD/VND exchange rate in the country in recent days. The USD-Index on February 6th, 2024, climbed back to over 104 points, the highest level since mid-November. Compared to the end of 2022, this index has increased by nearly 3.8%. It can be seen that the increase in the USD/VND exchange rate is still lower than the increase in the USD-Index.
A supporting factor for the USD is the possibility that the US Federal Reserve (Fed) will not cut interest rates back at the meeting in March as previously predicted. After the strong employment report was released, with 353,000 jobs created in January 2024, much higher than the forecasted increase of 180,000 jobs by economists, the likelihood of the Fed cutting interest rates at the next meeting has decreased.
Clearly, if the exchange rate in the country is only temporarily affected by the international market, this fluctuation may only be temporary. Because although the Fed will not cut interest rates soon at the next meeting, the world’s largest central bank still maintains its view that interest rates will be cut 3 times in 2024, as recently noted by Federal Reserve Chairman Jerome Powell.