A "moderate" increase in VND and US$ exchange rates will boost exports

According to experts, in recent times, the moderate depreciation of VND compared to USD will help promote export activities and increase the competitiveness of Vietnamese exports.

From the beginning of September until now, the US dollar price on the world market has fluctuated quite strongly when the USD Index (an index measuring the strength of the US dollars with major currencies in the world) has continuously exceeded the 104 point - highest level since March 2023. In the trading session on September 12, this index stood at 104.65 points.

According to the bond money market report of SSI Securities Company, the USD index is at a high level due to labour market data showing the positive health of the US economy, along with the Purchasing managers' index (PMI) of the service sector in this country has been also at its highest level since February 2023.

In addition, according to the currency market report of VNDirect Securities Company, the increase in the US dollar strength index is driven by concerns about the possibility that the US Federal Reserve (FED) might increase regulatory interest rates again this year, moreover due to rising US government bond yields in the context of the US Government stepping up issuance to offset the budget deficit.

According to VNDirect, the strengthening US dollar has put pressure on the VN dong exchange rate. At the same time, the US dollar also increased in value compared to most currencies in the region, including Thailand (up 2.5% compared to the beginning of the year), China (up 5.5%) and Malaysia (up 5.9% compared to the beginning of the year).

Meanwhile, in the domestic market, after a strong increase in the last days of August, the exchange rate between USD and VND has cooled down. The USD exchange rate at commercial banks decreased sharply compared to the previous session, listed around 23,870–24,240 VND/USD (buy – sell).

Therefore, in September and the last months of the year, experts all say that domestic exchange rate pressure still exists due to external forces.

According to SSI experts, VN dong fluctuations which are heavily influenced by seasonal factors and maintaining a divergent monetary policy with major central banks in the world is the factor creating greater pressure on the exchange rate in the third quarter of 2023.

According to VNDirect experts, rising exchange rates cause more pressure to repay foreign debt, especially for the private sector, at the same time, increase inflationary pressure because imported prices of input materials and goods. consumption increases.

“The greater the exchange rate pressure is, the narrower the room for further loosening of domestic monetary policy is. However, the State Bank will still support to stabilize the exchange rate this year”, according to VNDirect's report.

Accordingly, includes a high trade surplus. According to statistics from the General Department of Customs, in the first 8 months of the year, Vietnam's trade surplus was US$ 19.9 billion, 3.8 times higher than the same period in 2022. Along with that, thanks to the positive disbursement of FDI capital when 8 months reached US$ 13.1 billion and stable remittance flow, as well as additional foreign currency supply from equity divestment for foreign investors.

Experts and businesses all say that stabilizing the exchange rate within a suitable range will minimize negative impacts and improve the competitiveness of Vietnam's exports.

“A moderate depreciation of VN dong compared to US dollar (less than 3%) will promote export activities and increase the competitiveness of Vietnamese exports. In addition, we think that it is less likely to cause foreign investment capital to flow strongly out of Vietnam”, said Mr. Dinh Quang Hinh, VNDirect analyst.

Previously, many experts predicted that the exchange rate in the last months of 2023 would continue to be stable, fluctuating within a range of around 3%, which is below the margin prescribed by the State Bank of around 5%.

Source: Customs News