USD prices fall to five-month low as central bank turns to net VND injection

By Quang Minh
Wed, August 28, 2024 | 12:15 pm GMT+7

USD prices in Vietnam have been on the fall to around VND25,000 a dollar, the lowest since late March as the U.S. Federal Reserve (Fed) has hinted at cutting rates for the first time in years.

The State Bank of Vietnam (SBV) lowered its central reference USD/VND rate by VND12 to VND24,212 a dollar on Wednesday.

With a trading band of ± 5%, commercial banks can set their quotes at VND23,001-25,422 a dollar.

 A bank clerk at a Vietcombank branch. Photo courtesy of Thanh Nien (Young People) newspaper.

A bank clerk at a Vietcombank branch. Photo courtesy of Thanh Nien (Young People) newspaper.

State-run Vietcombank, the largest forex trader in the country, offered the dollar at VND24,630-25,000 for buy and sell, respectively, unchanged from Tuesday. The USD has lost 1.9% against the Vietnamese dong since its peak late in June.

Private banks Techcombank and Eximbank quoted the greenback at VND24,648-25,039 and VND24,640-25,070, up VND10-15 from Tuesday.

On the free market, the dollar was offered at VND25,110-25,200 for bids and asks, down VND90-100 from Tuesday, respectively. The greenback has lost 3.2% in value on this channel from its peak this year.

Analysts attribute the greenback’s weakening to the Fed’s likely rate cut next month.

Fed chair Jerome Powell last Friday stated: “The time has come for policy to adjust,” in his much-awaited keynote address at the Fed’s annual retreat in Jackson Hole, Wyoming.

Fixed income markets expect the Fed’s policymakers to cut interest rates at its next meeting on September 18, by 25 basis points.

The U.S. Dollar Index (DXY), which measures the dollar’s strength against a basket of currencies, was trading at 100,72 at the time of writing, the lowest since December 27, 2023, according to MarketWatch.

At home, Vietnam posted a trade surplus of $933 million in the first fortnight of August, resulting in a surplus of $15.49 billion in the year to August 15, according to the latest data of the General Department of Vietnam Customs.

Amid a stronger dong, the SBV on Monday (August 26) ceased issuing Treasury bills, marking the first time in months.

On August 5, the Vietnamese central bank reduced the T-bill rate by 25 basis points to 4.25% per annum, and then to 4.2% on August 20, and 4.15% on August 23.

Meanwhile, the banking regulator continues to support system liquidity by injecting via open market operations. It net pumped VND9.1 trillion ($365.9 million) on Monday.

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