Forex rates require close monitoring to year-end

In the first half of this year, the foreign exchange rate was a focus of attention from investors and managers, but the situation has eased and is forecast to continue through the remainder of the year.

Positive impact on economy

In the domestic market, the USD fell to under the 25,000 VND mark. Since April, the rate has lost more than 400 VND per USD, and it is now standing at the lowest so far this year.

Explaining the situation, Dr. Chau Dinh Linh from the Banking University – Ho Chi Minh City said it contains both intrinsic and extrinsic factors. He pointed to the depreciation of the USD on the expectation that Fed will lower rates for the first time by mid- September. Domestically, stable economic growth, a large trade surplus, and record disbursement of foreign direct investment have increased trust in the market.

The trade surplus in the first eight months of this year amounted to 15.5 billion USD, while FDI disbursement topped 13 billion USD – the highest so far. This positive trend shows constant trust from investors and firms in Vietnam’s competitiveness and potential.

Others hold that the main cause of the greenback’s nosedive is external, which is the certainty that Fed will cut the interest rates in September.

The easing of the foreign exchange rate has helped the State Bank of Vietnam reduce the open market operation, which subsequently led to a gradual fall in the interbank transaction interest rates.

Exporting firms will benefit from the easing of foreign exchange rates. (Photo: VietnamPlus)

According to Maybank experts, those importing input material or those with high foreign loans will also enjoy direct benefits in this context.

Sharing the view, experts from the Rong Viet Securities Company held that the easing would bring about many positive effects to the economy, removing inflationary pressure, increasing domestic purchasing power, and consolidating consumer trust to push economic growth.

Guards against uncertainties

Associate Professor, Doctor Nguyen Huu Huan, a lecturer from the University of Economics - Ho Chi Minh City, said seasonal demand for the greenback increases as businesses need to import material in service of year-end orders. However, the rise will be limited as the supply this year is relatively good and is well managed by the central bank.

Suan Teck Kin, Director of the section in charge of Market Study and Global Economy at the UOB, said that the Vietnamese currency will appreciate to 24,100 VND for each USD in the second quarter of next year.

Rong Viet experts said that with the current foreign exchange rate development, the State Bank of Vietnam will not need to raise the management interest rates to cope with rate pressure in the remaining months of this year.

However, experts also warned that in the context of slow global economy recovery and geopolitics, uncertainties may cause a volatile economic outlook. That is why measures to counter foreign exchange rates make sense, and firms should build rational risk management strategies.