As of 10:45 am on June 27th, the USD was trading at 25,950-26,030 VND/USD in the open market, the highest level ever recorded, with both buying and selling rates increasing by 70 VND compared to June 26th. Since the beginning of the year, the USD/VND exchange rate in the open market has risen by approximately 4.6%.
Meanwhile, the USD exchange rate at Vietcombank, one of Vietnam’s largest banks, increased slightly by 7 VND in both buying and selling rates compared to the previous day, reaching 25,227 VND/USD (buying) and 25,477 VND/USD (selling).
Consequently, the USD rate in the open market is currently higher than that of the bank, with a difference of 723 VND on the buying side and 553 VND on the selling side.
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USD-Index Movement since the Beginning of 2024
Source: tradingview
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The upward pressure on the USD in the international market is one of the main factors contributing to the strain on the USD/VND exchange rate in the open market.
During the previous week (June 17-21, 2024), positive economic data from the US, including retail sales and industrial production, exceeded expectations. As a result, the USD-Index continued its upward trend, ending the week 0.3% higher at 105.83 points.
Currently, the USD-Index has climbed a further 0.1 points from last week, reaching 105.93 points, the highest level in the past two months.
According to published data, the US composite Purchasing Managers’ Index (PMI), which tracks both the manufacturing and services sectors, rose to 54.6 in June 2024, the highest level since April 2022.
This business growth in the US coincides with a recovering labor market. Data released on June 20th indicated a slight decrease in initial jobless claims for the previous week.
The USD continues to strengthen following data that shows the US economy is on a recovery path, despite interest rates being at their highest levels in decades. This has led to a reduction in expectations for the Federal Reserve (Fed) to cut interest rates.
The Fed’s hesitation to lower interest rates, while other central banks such as the European Central Bank (ECB), the Bank of England (BoE), and the Swiss National Bank (SNB) have already implemented rate cuts, could lead to widening interest rate differentials between the US and other countries. This, in turn, may maintain strong demand for the USD.
In a recent analysis report, ACB Securities predicted that the Fed’s delayed and smaller-than-expected interest rate cuts compared to earlier predictions will make USD/VND exchange rate pressure a persistent issue. Furthermore, this pressure could intensify during the summer as the trade balance shifts towards a trade deficit to prepare for year-end production, business, and export activities.
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With the currency exchange rate fluctuating in the first few weeks of 2024, Mr. Ngo Dang Khoa, Director of Foreign Exchange, Capital Markets and Securities Services at HSBC Vietnam, highlights four factors putting pressure on the USD/VND exchange rate in Q1/2024…
