Hanoi (VNA) - Experts have predicted increased volatility in Vietnam’s foreign exchange market from now to the end of 2024, especially when the US presidential election unfolds.
The USD/VND exchange rate has climbed significantly over the past two weeks, with bank-listed rates up 4.3% since the start of the year. This upward pressure reflects global influences, particularly the US election race between Republican Donald Trump and Democrat Kamala Harris. This is coupled with seasonal factors driving increased foreign currency demand. Experts have predicted varied scenarios for exchange rate movements post-US presidential election.
No signs of liquidity shortage in the market
In early November, interbank VND interest rates rose from their relatively low levels in October, while the USD/VND rate approached mid-2024 highs.
Dinh Duc Quang, managing director of the currency business division at the United Overseas Bank Limited (UOB) Vietnam, observed that the developments align closely with global forex and monetary market turbulence.
Quang noted that, from the global aspect, the US economy continues to demonstrate surprising resilience compared to other major economies, despite the US Federal Reserve keeping interest rates at elevated levels for the past two years.
According to Quang, the State Bank of Vietnam (SBV) has implemented strategic measures to stabilise domestic markets. In response to a sharp increase in the USD/VND exchange rate, treasury bills were issued to absorb excess liquidity and reduce exchange rate pressure. Additionally, when the market required more VND liquidity, the SBV injected funds through open market operations.
Data available shows that by the end of November 4, the SBV had issued approximately 80 trillion VND (3.15 billion USD) in treasury bills, while injecting 50 trillion VND through open market tools. This balanced approach demonstrates the central bank’s effective use of its instruments to maintain market stability. The steady interest rates for savings deposits at commercial banks during October and early November further underscore that there are no signs of liquidity shortages in the market.
Contrasting scenarios and projections
Quang said regulatory authorities are unlikely to adjust policy interest rates in the near term, while continuing to leverage commercial intervention rates to stabilise the market. Short-term deposit rates for three-month terms are anticipated to remain in the range of 3% - 4%, while long-term rates for 12-month deposits are forecasted to hover between 5% - 6%.
He said the USD/VND exchange rate is projected to fluctuate within an annual range of approximately 3%, supported by Vietnam's sustained macroeconomic fundamentals including the growing trade surplus, foreign investment attraction, overseas remittances, and tourism.
Quang assessed that the outcome of the US presidential election is unlikely to have a significant direct impact on VND interest rates or the USD/VND exchange rate. This is due to Vietnam’s tightly managed currency, which is influenced more by long-term trade and investment activities rather than short-term speculative or investment factors.
However, contrasting perspectives exist. Analysts at Shinhan Securities Vietnam (SSV) cautioned that a Trump victory might increase pressure on the exchange rate due to market preferences for low-risk assets and expectations of policy shifts under a new administration. They predicted that the USD and US government bonds would continue to be safe havens, driving the value of the greenback to rise against other currencies through the end of the year./.
