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The reasons for the sharp increase in the VND / USD exchange rate

Monday 23, 03 2020
From now until the end of the year when the epidemic situation is over, the USD price will still fluctuate within a range of about 1-2%
The reasons for the sharp increase in the VND / USD exchange rate

The exchange rate of VND/USD via commercial banks on the afternoon of March 20 has increased to approximately 23,600 VND, while the price on the free market has also exceeded 23,700 VND/USD. Along with the fluctuations of the world financial market, the domestic foreign exchange market from the beginning of last week (March 16) has also recorded a sharp increase in the VND / USD conversion rate.

By the afternoon of March 20, the USD exchange rate at many major commercial banks reached approximately VND 23,600 / USD, which is an increase of more than VND 400 compared to the end of last week. On the free market, many foreign currencies converting facilities have accepted to purchase at the exchange rate of 23,600 VND, but have also pushed the selling price to exceed 23,700 VND/USD, which has been the highest since the beginning of the year.

The reasons for the sharp increase in USD

To explain this phenomenon, Dr. Can Van Luc said that the sharp increase in the USD exchange rate was mainly due to the influence of the price of this currency in the world, while the USD liquidity in the country remained stable. He said that compared to the beginning of the year, the VND / USD exchange rate had increased by 1.3%, while the strength of the USD against the 6 major currencies in the world has increased by more than 7%, to a 3-year high.

According to Mr. Luc, the global USD exchange rate is increasing sharply due to investors' worries in the context of the complicated Covid-19 epidemic. "When the epidemic is stressful, investors often look for safer assets, and the US dollar is often regarded as such a shelter," he said. Sharing the same view, Dr. Bui Quang Tin also said that there were many reasons for the exchange rate to be under pressure. In particular, the most significant increase was the index of the USD Index in the world this week.

“This is a measure of the strength of the dollar in comparison with 6 other strong currencies including euros, pounds, Japan, Canada, Sweden, and Switzerland. Compared to this exchange rate, Vietnam is still much lower than the 6 strong currencies of the world,” Mr. Tin said. According to calculations, by March 20, the domestic exchange rate of USD has increased by about 1.3-1.5% compared to the beginning of the year, so it is equivalent to about 1/6 of the world.

The expert cited two reasons why the world dollar has risen sharply in recent days.

In particular, not only the US Federal Reserve (FED) has offered measures to stimulate the economy such as reducing interest rates by 0-0.25% or the Government’s commitment to launch trillions of dollars on the market, but most of the other countries have also had support policies that are not inferior to those of the United States.

However, after that support, all kinds of goods have decreased, including stocks, real estate, gold, oil, etc. This shows that people and investors are not waiting for monetary policies, and what they need now are the vaccine to the Covid-19 virus, the epidemic being resolved, and the commodity economy returning to normal. "Secondly, at the moment, investors are not considering the US government bonds, Japanese yen, or gold to be safe havens anymore. Instead, they are rushing to buy USD, which is why the world USD exchange rate soared in just the last 1 week, "Mr. Tin said. 

The reasons for the sharp increase in the VND / USD exchange rate

It is only temporary

However, experts also believe that the signal of increasing price this time of the USD is only short-term because when the disease goes down, the economy returns to normal, the confidence of investors will once again return.

Then, the commodity markets will increase, investors will withdraw money from the shelter channels to pour into risky assets and the exchange rate will regain its stability. For the domestic market, Dr. Bui Quang Tin said that the current signals show that people are not too worried about the disease that they pour money into gold or USD.

Although the overseas remittance market, import, and export have been affected, and the FDI capital has also decreased, etc., the USD liquidity in the country is still stable. In particular, Vietnam has the strength of huge foreign exchange reserves. "From now until the end of the year when the epidemic situation is over, the USD price will still fluctuate within a range of about 1-2% as it has been initially calculated by the SBV," Mr. Tin emphasized.

Sharing the same view, Dr. Can Van Luc said that with the current developments, the exchange rate would be quite complicated as the market was showing signs of economic recession in the world. However, the supply and demand for foreign currencies in the country was still good, and the exchange rate this year might increase within a range of 1-2%, which is the acceptable level.

On the global market, the USD Index has increased continuously since the Fed announced a second reduction in the emergency interest rates at the end of last week, currently maintaining the level of above 102 points. The index has increased by 6.4% / week from 97.7 points at the end of last week to the highest peak of 103.97 points at the end of this week. The last time the index measuring the strength of the USD was traded at this level was January 2017.

​>> The surprising effects of the exchange rate

​Source: https://news.zing.vn/

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