03.09.2020, 22:31

Can the State Bank restrict buying USD, VND will increase in price?

Can the State Bank restrict buying USD, VND will increase in price?

Bao Viet Securities Joint Stock Company (BVSC) has just reported a review of recent developments in the money market, with a spotlight at the USD / VND exchange rate.

This report points back, closing the week from August 24 to August 28, the central exchange rate slightly 5 dong, down to 23,205 VND / USD. The exchange rate at commercial banks also did not change much, trading around 23,090 – 23,270 VND / USD (buying – selling price).

The USD / VND exchange rate continued to be stable in recent weeks when the USD – USD index (DXY) weakened and the foreign currency supply was abundant. Specifically, in the first 8 months of the year, Vietnam saw an estimated trade surplus of 11.9 billion USD, only in August, the trade surplus was about 4.4 billion USD.

The total realized foreign direct investment capital as of August 20 also reached USD 11.4 billion, a decrease of 4.7% compared to the same period last year but still a relatively large level.

According to BVSC’s analysis, in the coming time, the VND / USD exchange rate may continue to decline.

The first basis of the forecast is based on the weakening of the DXY index, because the US Federal Reserve (Fed) will shift the monetary policy management target from relying on a “hard” target to 2% inflation to a more flexible mechanism than relying on “medium inflation”.

This may cause the Fed to continue to maintain monetary easing status for a long time even though inflation exceeds 2%.

“Besides, in order to avoid the risk that Vietnam will be included in the list of US currency manipulation, it is very likely that the State Bank will restrict net foreign currency buying activities in the coming time”, said BVSC’s report.

This movement is likely to make the VND stronger against the USD, thereby causing the VND / USD exchange rate to decrease.

The DXY index closed the week at 92.37 points, down 0.93% from the previous week. The USD depreciates against all other currencies in the basket.

Specifically, USD depreciated by 0.41%; 2.01%; 0.9%; 1.98%; 0.59% and 0.82% against JPY, GBP, EUR, SEK, CAD and CHF.

USD depreciated last week in the context of Fed announced a new strategic framework for operating monetary policy and long-term goals as mentioned above.

Accordingly, the Fed will prioritize the target on the labor market. The most important point is that the agency has moved from a “hard” inflation target at 2% to an average 2% inflation target. This may cause the USD to continue its weakening trend against other currencies when interest rates are lower and inflation remains higher than other countries.

Source: bizlive.vn – Translated by fintel.vn