International pressure increases on the exchange rate

08-Aug-2019 Intellasia | Tri Thuc Tre | 6:02 AM Print This Post

Weekly monetary market report published by SSI Securities Research and Advisory Group, said the sentiment was positive when receiving positive US economic news and waiting for the Fed’s first interest rate cut after 11 years, which helped the US dollar maintain its upward momentum from the end of last week and peaked at 98.52 points on July 31.

However, the US president seems to be dissatisfied with the Fed’s interest rate cut and the stalemate in trade negotiations with China when the election is approaching, claiming that the US will impose a ten percent tax on $300 billion of the remaining goods from China, starting from September 1. USD/CNY exchange rate has immediately increased sharply to 6.94 at the end of last week and now surpassed the psychological threshold of 7.0 after People’s Bank of China adjusted the reference rate on August 5. DXY index also fell below the 98 mark.

The developed economies are also facing a lot of uncertainties such as the tension between Japan and Korea, the possibility of United Kingdom agreement on Brexit, the negative economic indicators of the European region. Increasing risks make global investors find sheltering goods, gold increases by 0.97 percent to $1,441 per ounce; government bond yields fell sharply; Japanese yen and Swiss franc increased by 2 percent and 1.1 percent respectively.

Most of the remaining currencies dropped sharply in the past week. Among them, pound and euro decreased by 1.75 percent and 0.17 percent respectively; Accumulated from the beginning of the year, these two currencies reduced prices by 4.67 percent and 3.14 percent respectively against US dollar. South Korea won continued to extend its downtrend chain by declining by 1.72 percent wow and 8.11 percent compared to the same period last year.

In the past week, the USD/VND exchange rate increased by 20 dong per US dollar on the bank, to 23,170/23,290; unchanged at the buying side and increased by 10 dong per US dollar in the afternoon on the open market, at 23,200/ 23,220.

The previous stable international context together with abundant US dollar supply helped the dong to recover in seven weeks, returning to the exchange rate equivalent to the end of 2018. The State Bank of Vietnam (SBV) also bought more foreign currencies for reserves. During this period, the central rate was still on the upward trend, currently at 23,090 dong per US dollaran increase of 11 dong compared to last week and an increase of 1.16 percent compared to the end of 2018. This movement shows the consistency in the governance of SBV to respond to unexpected movements.

In fact, the international pressure is suddenly increasing and the current devaluation of Chinese yuan will create certain pressure on the dong. And on the first trading day of the new week of August 5, the central exchange rate and the exchange rate of commercial banks simultaneously increased. In which, the central rate reached 23,100 donga record high so far, and the US dollar price of banks increased from 40 to 55 dong compared to the end of last week. At Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)and Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV)the two banks with the most active foreign exchange transactionsthe exchange rate pegged the listing date at 23,21523,335 dong per US dollar55 dong higher than last Friday.

Despite the pressure from the international market mentioned above, according to SSI’s analysis group, with many monetary policies and reserves and domestic foreign currency supply, the exchange rate of USD/VND fluctuates. It will be in the range of fluctuations in late May and early June, which means the region ranges from 23,250 to 23,350 dong per US dollar.

 


Category: Finance, Vietnam

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