Prices of the U.S. dollar on the free market reached an all-time high on Tuesday as demand for forex remains high amid rising gold prices and the country's strong import recovery.
Gold shops in Vietnam quoted the greenback at VND25,540-25,670 a dollar for bids and asks, up respectively VND60-90 from Monday. USD prices on the free market jumped VND110-140 on Monday from last weekend.
Free-market USD prices reached a record high of VND25,500 in October 2022.
Commercial banks have also raised their USD prices. Vietcombank, the leading forex trader, is buying the dollar at VND24,480 and selling at VND24,850, up VND10 from late Monday. Similarly, Eximbank is offering the dollar at VND24,460-24,830.
BIDV, another “Big 4” bank, quoted the USD at VND24,530-24,840, up VND15-25 from Monday.
As such, free-market prices are VND820-1,000 higher than those offered by banks, nearly twice the gap seen in late 2023.
The State Bank of Vietnam raised its mid-point rate by VND8 on Tuesday morning to VND24,012 a dollar.
Meanwhile, the U.S. Dollar Index (DXY) is trading at 103.87, up just 0.04%. Traders are waiting for U.S. news that may impact the markets this week. Fed chair Jerome Powell will testify before key House and Senate committees this week. U.S. payroll data is due Friday.
In addition, traders are purchasing forex on the unofficial market to import gold illegally to satisfy gold demand as prices of the precious metal have hit new records, according to analysts. Prices of SJC-branded gold eased to VND78.5-80.52 million ($3,178-3,260) a tael after rising VND500,000 a tael to VND78.9-80.92 million a tael at the Tuesday open.
KB Securities (Vietnam) analysts attribute higher USD prices to the large gap between USD- and VND-denominated interest rates, which has prompted carry trade.
Another cause is an 18% year-on-year increase in goods imports in the first two months of this year, triggering demand for forex to cover bills.
Finance expert Nguyen Tri Hieu did not rule out hoarding as another cause as traders anticipate a continued upward trend of the greenback.