Exchange rate will not exceed a maximum of 3pct this year on forecast

23-Jul-2016 Intellasia | Dau Tu Chung Khoan | 6:00 AM Print This Post

The foreign exchange market remains stable, but it should not be subjective as the US Federal Reserve System (Fed) meeting is approaching (scheduled to take place on 26-27 July), with the main focus on decision to raise US dollar interest rates.

In fact, the foreign exchange market for the first 6 months was stable with application of central exchange rate mechanism by day, along with activities of market intervention since the end of 2015 have been effective, in the events of accelerating FDI disbursement and positive results of import-export activities.

Accordingly, the rate fell from 22,500 VND/ USD end of 2015, to around 22,360 VND/ USD, after rising slightly to 22,480 VND/ USD from the first half of June 2016, in the situation that Fed did not augment the rate in June as the US economy has not stabilised as expected and fear of the negative impact of after Brexit, as well as the impact of activities against dollarisation of the State Bank of Vietnam (SBV).

The report from the general Department of Customs said, the trade balance deficit is only slightly in June, about 17 million USD. Money sources are still plentiful from FDI and FII flows which are likely to increase. In particular, the total newly-registered and increased FDI after 6 months of the year was 11.28 billion dollars, an increase of 105.4 percent over the same period of 2015; in which FDI disbursement reached $ 7.3 billion, up 15.1 percent compared to the same period of 2015. The trend to loosen room for foreign investors is likely to attract more dollars in Vietnam, at the same time, the sources of money from the M & A, IPO are abundant as promise.

“Exchange rate dropped in the first half and abundant supply of foreign currency, thus, the State Bank purchased large amount of foreign currency, strengthening foreign exchange reserve and improving market regulation when necessary. The State Bank’s report also showed that, the net purchase of foreign currency from the beginning of this year reached about $8 billion, the highest level in 6 months of the last 5 years “, deputy general manager in charge of fund of a joint-stock bank said.

However, not all analysis is optimistic. Report from the National Financial Supervisory Committee forecasts, the factors supporting the exchange rate in the last 6 months will not be as favourable as in the first half due to: first, according to seasonal factors, the balance of foreign currency supply and demand will rise by the end of the year due to increased import demand; second, the possibility that Fed will raise interest rates once at the end of the year, when the rate is adjusted, the dollar will increase price on international market, to influence the exchange rate of VND/ US $; Third, the renminbi might continue the risk of devaluation in the last 6 months, on the one hand due to the lack of positiveness of China’s internal factors, on the other hand due to the impact from the rising of US interest rates and exchange rates of currencies in the basket of currencies of the country.

Monetary director of a bank analysed, the impact of international factors is significant. The Event of Brexit has increased uncertainties on the global financial market, meaning that the risk of future increases when many unpredictable factors, including the laws, trade rules, labour mobility… are developed and reset.

This event has made significant changes on statements and trend of financial market, the stakeholders and third parties will be more cautious before the uncertainties ahead. The major central banks around the world are forced to make adjustments, which is distinctive with previous plans.

“After Brexit, China’s central bank devalued its currency to the lowest level of nearly 6 years, while the neighbouring countries of Vietnam with a floating exchange rate regime devalued their local currencies. Fiscal policies of many countries, including Britain, also have certain adjustments. All of these factors will put pressure on the USD/ VND exchange rate in the near future with the forecast in the third quarter of 2016. VND devaluation is likely to happen slightly and the forecast exchange rate of USD/ VND increased by a maximum of 3 percent this year, “The director said.

HSBC Economist said that the foreign exchange reserves are still quite thin to deal with cases of sudden risks. At the end of 2015, according to data from the International Monetary Fund (IMF), foreign exchange reserve of Vietnam fell to 27.9 billion dollars, equivalent to 2 months of goods and service import.

Based on the trade data and existing portfolio together with local media reports, HSBC believes that the reserve could have recovered about 33.6 billion US dollars (equivalent to 2.5 months of import) during the first quarter of 2016. However, the index is still low, particularly in the context of renminbi fluctuation risk, affects to Vietnam Dong.

 


Category: Finance, Vietnam

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