Vietnam exchange rate pressures to ease gradually: economist
Vietnam will see exchange rate pressures ease gradually as the U.S. Federal Reserve (Fed) gets set to reduce interest rates and the gold market becomes more stable, said economist Can Van Luc.

The exchange rate will gradually cool down from end-Q2, 2024, according to Can Van Luc, chief economist of BIDV bank. Photo by The Investor/Trong Hieu.
Luc, chief economist of BIDV bank and director of BIDV Research & Training Institute, predicts that the exchange rate will gradually cool down from end-Q2 and the dollar’s increase against Vietnam’s dong will be limited to 2.5-3% this year.
Since the beginning of this year, the greenback has climbed 4.5% against the dong.
On April 20, the reference exchange rate announced by the State Bank of Vietnam rose VND29 from the previous day to VND24,260 per USD.
The buy-sell rate at major lender Vietcombank increased correspondingly to VND25,133-25,473 per USD, up 4.3% from the beginning of the year. In the black market, it climbed Saturday to VND25,680-25,780 per USD.
The U.S. Dollar Index (DXY), which measures the value of the greenback against a basket of six foreign currencies – the Euro, Swiss franc, Japanese yen, Canadian dollar, British pound and Swedish krona, closed Friday to 106.12 but was still at a 5-month peak.
Its climb began after Fed Chairman Jerome Powell said that high interest rates may be maintained for a longer period of time as inflation in the U.S. showed no signs of cooling down. Since the beginning of the year, the DXY has expanded about 4.7%.
Rising world and domestic exchange rates have significantly affected the movements of capital flows, as well as the prices of other types of assets in the market.
It has been seen that every time the exchange rate increases beyond 2%, the stock market experiences a correction as foreign investors net sell stocks and market sentiment becomes cautious.
According to BIDV Securities, in the first three months of 2024, foreign investors net sold a total of VND11.55 trillion on all three exchanges – the Ho Chi Minh Stock Exchange (HoSE), Hanoi Stock Exchange, and Unlisted Public Company Market – equivalent to 50.62% of the total for 2023.
The sharp increase in exchange rates forced Vietnam’s central bank, the State Bank of Vietnam, to sell foreign exchange reserves.
On April 19, Pham Chi Quang, director of the SBV’s Monetary Policy Department, said that the central bank’s intervention plan involved selling foreign currencies to credit institutions with negative foreign currency positions and balancing the foreign currency ratio to zero.
Earlier, as part of moves to reduce pressure on exchange rates, the SBV increased bill issuances, pushing up interbank interest rates. According to SBV data, the average overnight VND interbank interest rate rose to 4.7% per year on April 15 - the highest level since mid-May 2023.
SBV Deputy Governor Dao Minh Tu said that openness of Vietnam's economy and many capital transaction activities with international partners were a factor in the hike, as also the fact that the Fed did not give a specific time to loosen monetary policy or lower interest rates. He said the currencies of other countries had also depreciated.
"In addition, Vietnam's strong interest rate reduction has made VND interest rates lower than that of the USD had created pressure, causing the greenback to "heat up", the deputy governor explained.
In Q1, a large quantity of imports pushed up the demand for foreign currencies compared to the previous quarter. Quang said that import demand had increased, especially for gasoline and iron and steel products, exerting pressure on the foreign exchange market. To prevent exchange rate risks, businesses had increased forward foreign currency purchases, causing future foreign currency demand to shift to the present, he explained.
Proactive, flexible policy
The banking system's abundant liquidity, falling interest rates and high VND-USD interest rate difference were also factors that exerted pressure on the exchange rates, economist Luc noted.
However, it will gradually cool down from end-Q2 and the greenback will rise about 2.5-3% this year, he added.
He also expected Vietnam’s monetary policy to be proactive and flexible, with interest rates maintained at a low level to promote growth. The economy's capital supply structure in 2024 and the following years will shift in a more positive direction by gradually reducing the proportion of credit channel and increasing that of capital market channels and private investments.
According to BIDV Securities (BSC), exchange rate pressure will partly be relieved when the SBV signals its readiness to intervene and stabilize the market.
The early consideration of amending Circular 02 on stabilizing the currency market and Decree 24 on avoiding the “goldenization” of the economy will ease pressures on the foreign exchange market.
Another economist, Nguyen Duc Hung Linh, said that looking back at 2022 and 2023, there were three steps the SBVcould take to control the exchange rate: attract liquidity, using T-bills and other operations; sell foreign exchange reserves; and increase operating interest rates.
“In 2023, we did not have to increase operating interest rates because the supply from the trade surplus was good. Currently, the SBV has implemented step 1, but after more than 5 weeks the exchange rate shows no signs of easing. The next step is to sell foreign exchange reserves to stabilize the rate. If step 2 does not show clear effectiveness, the SBV may have to use step 3.”
SBV Deputy Governor Tu had said at a press conference on April 19 that the central bank was always ready to intervene if there were strong fluctuations in the USD/VND exchange rates that negatively affected the economy. Given the SBV’s current foreign exchange reserves and “additional sources from 2023,” it can ensure effective state management of exchange rates and achieve the goal of stabilization, he had assured.
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