On September 12, the State Bank of Vietnam (SBV) announced the reference exchange rate at 24,187 VND/USD, a significant drop of 25 VND from the previous day. The buying and selling rates at commercial banks also witnessed a sharp decline to 24,365 VND and 24,705 VND, respectively, a decrease of nearly 100 VND compared to the beginning of September. Since the peak in April, the exchange rate has only increased by about 0.8% year-to-date.
US Dollar Weakens
Ms. Bich Thanh, a resident of District 5, Ho Chi Minh City, shared her surprise at the recent drop in the USD exchange rate. She recalled her recent foreign travel experience, where she was able to purchase USD at a commercial bank for around 24,720 VND. In contrast, back in April, she had to pay 25,480 VND for the same amount of USD. “It’s evident that the USD rates at commercial banks have cooled down,” she remarked.
 about a possible interest rate cut in the upcoming September policy meeting.</p>
<p>With the foreign exchange market well-supplied, the State Treasury has announced its intention to purchase 100 million USD from commercial banks. This move indicates the government’s readiness to increase foreign exchange reserves, following a period of intervention in the market.</p>
<p>Building up foreign exchange reserves means injecting VND into the market, which helps prevent a rapid decline in the USD/VND exchange rate and supports export activities. ” the=”” sbv=”” is=”” likely=”” to=”” continue=”” purchasing=”” foreign=”” currencies,=”” providing=”” more=”” room=”” for=”” maintaining=”” a=”” loose=”” monetary=”” policy=”” and=”” keeping=”” deposit=”” interest=”” rates=”” from=”” rising=”” too=”” high,”=”” said=”” associate=”” professor=”” dr.=”” nguyen=”” huu=””></p>
<p>Mr. Hoang Huy, a strategic analyst at Maybank Securities Company, noted that the exchange rate has consistently remained below the 25,000 VND/USD level after dropping below this threshold. Notably, the SBV has been proactive in its management, flexibly issuing bills and reducing the open market operation (OMO) interest rate. These measures aim to anticipate and respond to the Fed’s expected interest rate cut (projected to be between 0.25 and 0.5 percentage points in the September meeting), creating an opportunity to lower interbank market rates and, consequently, ease the pressure on deposit interest rates.</p>
<p>“The SBV has issued a circular related to the official foreign reserve investment structure and foreign currency trading between the official foreign reserves and the state budget. According to this circular, the State Treasury can purchase foreign currencies directly from the SBV’s foreign reserve instead of the market, thereby reducing pressure on domestic exchange rates,” Mr. Huy explained.</p>
<p><b>Boosting Economic Growth</b></p>
<p>Mr. Nguyen The Minh, Director of Analysis at Yuanta Vietnam Securities Company, asserted that the new exchange rate dynamics bring about positive impacts on the domestic economy. These include easing inflationary pressure, boosting domestic purchasing power, and strengthening consumer confidence, all of which contribute to economic growth.</p>
<p>A stable exchange rate attracts foreign investment, both direct (FDI) and indirect (FII). A consistent exchange rate reassures foreign investors and encourages capital inflows.</p>
<p>For businesses, importers benefit from a weaker VND as it lowers their input costs. While exporters theoretically face negative consequences due to the decrease in USD value for goods traded in USD, the end of the US tight monetary policy cycle to curb inflation is expected to indirectly benefit some export sectors through improved consumer demand.</p>
<p>Notably, according to experts, the exchange rate reduction will ease the pressure on interest rates, especially as banks strive to boost credit growth. Associate Professor Dr. Nguyen Huu Huan predicts that lending rates will not fluctuate drastically from their current levels. There might be a slight increase in lending rates towards the end of the year when demand for loans is typically higher, particularly in the northern provinces requiring capital for reconstruction and recovery after natural disasters. This increased credit demand is likely to drive stronger credit growth.</p>
<p>The Vietnam Export Import Joint Stock Commercial Bank (Eximbank) stated that it would continue to focus on promoting credit growth in production and business sectors, processing and manufacturing industries, wholesale and retail trades, and essential consumption. Eximbank is also actively providing loans to individuals for purchasing houses for living purposes, acquiring land use rights for building houses, and avoiding speculative investment in real estate and below-standard corporate bonds.</p>
<p>“Eximbank prioritizes lending to production and business enterprises, import-export companies, small and medium-sized enterprises, and individual customers for essential consumption needs. Borrowers with production, business, and essential consumption purposes will benefit from streamlined paperwork, quick processing times, and the most competitive interest rates,” said a representative from Eximbank.</p>
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<p><b>Impact on the Stock Market</b></p>
<p>Experts explain that if the Fed cuts interest rates, it won’t immediately affect Vietnam’s monetary policy but will require a certain lag. However, the positive impact on market sentiment will be significant, attracting capital flows from the US to emerging markets.</p>
<p>Associate Professor Dr. Nguyen Huu Huan analyzed that Southeast Asian stock markets are witnessing a rebound in foreign investment inflows. For instance, in Indonesia, foreign investors have net bought 3 billion USD. Thailand and the Philippines are also experiencing positive trends. However, the Vietnamese stock market, with the VN-Index no longer offering attractive valuations, has not yet seen a reversal in the net selling trend by foreign investors.</p>
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<p>The US dollar weakened significantly on the global market today, and this decline was reflected in the drop in USD rates in the domestic market. The USD exchange rate in the free market has fallen below the 25,000 VND per USD mark for buying.</p>
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