Vietnamese dong weakens less against US dollar than other currencies
The Vietnamese dong has so far this year fallen about 4% against the U.S. dollar, according to the State Bank of Vietnam, but the depreciation is smaller than popular currencies worldwide.
The SBV decided to raise key policy rates by one percentage point on September 22, taking effect the next day, following a sharp rise in U.S. interest rates by the U.S. Federal Reserve.
Unlike other countries that have been seeking to bring down double-digit increases in inflation, Vietnam's consumer price index (CPI) in September rose 4.01% from December last year, with the figure for the first nine months only 1.88%.

The U.S. dollar is rising worldwide. Photo courtesy of Vietnam News Agency.
On the morning of September 20, currencies having depreciated much against the U.S dollar compared to the end of 2021 included the Japanese yen (-25.18%), Chinese yuan (-10.9%), euro (-13.49%), and British pound (-20.02%).
Fitch Ratings stated on September 27 about Vietnam: “We now believe that further policy rate hikes are likely in the near term, partly in order to reduce the risk that exchange-rate weakening could add to imported inflation, and further upward pressure on deposit rates is likely as US dollar interbank rates push up against Vietnamese dong interbank rates.”
A trade surplus and moves by the SBV have supported the Vietnamese dong against other currencies like the euro, which is facing its own pressures stemming from the Russia-Ukraine conflict and an economic slowdown.
The SBV has been selling large amounts of U.S dollar from its foreign exchange reserves and has withdrawn trillions of Vietnamese dong (VND1 trillion = $41.87 million) through open market operations to maintain banking system liquidity and indirectly increase interbank interest rates.
Vietnam’s economic growth of 8.83% year-on-year in the first nine months is the highest recorded in 12 years. The figure for the same period in 2021 and 2020 - both pandemic years, was 1.42% and 2.12%, respectively. The economy expanded 2.58% last year.
Meanwhile, the January-September trade surplus hit $6.52 billion, a big leap compared with a trade deficit of $3.44 billion in the same period last year, according to Vietnam’s General Statistics Office. For the whole year, the government agency forecast late September that the national economy could expand 8%, much higher than the 7% target.
Similarly, analysis by Malaysia-based Maybank expects Vietnam’s GDP to grow 8% in 2022, up from a previous forecast of 6.9% by the bank, supported by retail sales on an improved labor market and the return of tourism following Covid-19 lockdowns. Maybank’s 2023 Vietnam GDP forecast was downgraded to 6% from 6.4%, based on the rising probability of a U.S. recession that could reduce U.S. demand for Vietnamese goods.
Jeffrey Roach, chief economist at LPL Financial, was quoted by Fox Business on October 3: "The strong U.S. dollar will provide a tailwind for GDP growth [of the U.S.] in the third quarter. However, significant weakness in Europe and Asia will diminish demand for U.S. exports as the global economy heads into the winter months."
Fox Business noted that there were downsides to the U.S. dollar's strength: executives of multinational corporations with headquarters in the U.S. have said the muscular greenback is dinging their profits.
In Vietnam, the State Bank set the central exchange rate at VND23,371 on Tuesday morning, up from VND23,400 last Friday. Vietcombank quoted a USD at VN23,750 and VND24,030 (buying and selling), an increase of VND30.
The rate on the free market was flat on Tuesday morning, with a buying level of VND24,000 and selling at VND24,200. Meanwhile, the buying and selling prices for the euro were VND23,400 and VND23,900, respectively, up VND10 compared to last Friday.
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