VND does not depreciate against USD after Fed raises interest rates
Last week, after the Fed raised interest rates, emerging countries’ currencies all fell against the USD but the dong did not.
The dollar last week continued to maintain its upward momentum, with the Dollar Index (DXY) – an index that measures the value of the dollar against a basket of other currencies – adding 0.5%. The major currencies split, while the local currencies of emerging countries almost all fell. The yuan (CNY) fell 1.1%, the Indian ruppe (INR) fell 0.6%, the Thai local currency (THB) lost 0.34%. However, VND was mostly flat in the past week, contrary to the downtrend of regional currencies.
According to the Analysis Department of SSI Securities Company (SSI Research), the main supporting factor for the dong in this period continues to be the positive supply of USD, with the trade balance estimated to have a trade surplus of 2.5 billion USD in 2018. In the first 4 months of the year, disbursed FDI was 5.9 billion USD.
In addition, data from the State Bank of Vietnam also showed that remittances continued to remain positive in the first quarter of the year, reaching $1.8 billion, up 14% over the same period.
On the interbank market, the USD/VND exchange rate traded around 22,960 dong, while the listed exchange rate at commercial banks decreased by 5 dong, closing the week at 22,780 dong in buying and 23,090 in selling. out.
On the contrary, the exchange rate on the free market continued to increase by 90 points after many weeks of moving sideways, trading at 23,555 for buying and 23,595 for selling.
Before that, after the policy meeting in early May, the US Federal Reserve (Fed) raise interest rates added 50 basis points, the biggest increase in 22 years. At this meeting, the Fed also announced plans to shrink its balance sheet from June.
The market is leaning towards the possibility that the Fed will raise interest rates more aggressively when a forecast tool from the Chicago Mercantile Exchange (CME Group), the world’s largest financial derivatives exchange, shows that 91% of the Fed will raised interest rates by 0.75% at the June meeting. Meanwhile, European Central Bank (ECB) officials are also signaling that they will soon tighten monetary policy right in the summer. The UK’s main message is also not very positive, seeing that inflation in this country may rise to 10% before cooling down.
This movement made the market sentiment turn negative. US stocks posted a fifth straight weekly loss, with the Nasdaq falling more than 13%. Yields on 10-year US government bonds rose 8 basis points and surpassed 3%, their highest level since November 2018. The greenback continues to maintain its upward momentum.
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