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What goes up must come down

Thursday 16, 04 2020
The exchange rate on the interbank market dropped to 23,437 VND/USD last Friday following a previous record-high increase to nearly 23,650 VND.
What goes up must come down

Since the beginning of the year, the exchange rate has increased by approximately 1.13% and the State Bank of Vietnam has not had to sell foreign currencies as an intervention.

Going up

The emergency reduction in the interest rate of 1.5% of FED in the early state of March has promoted the need to hold the USD due to concerns about a global crisis.

Therefore, the USD/VND exchange rate had had the highest increase since the beginning of the year to 23,650 VND at the end of March 2020. The USD index on 20th March reached a peak of 102.8 points and the USD continued to increase in value compared to other currencies or haven assets such as gold of JPY.

Immediately after that, the VND also continuously dropped in value and reached a peak of 23,650 VND on 24th March, increasing by approximately 2% compared to the beginning of the year.

The hot increase momentum of the exchange rate has forced the State Bank to sharply reduce the dollar selling price by 257 VND to 23,650 VND/USD on 24th March for banks with negative foreign currencies to ensure a smooth supply of foreign currencies.


What goes up must come down

However, after the aforementioned decision, the exchange rate on the Interbank market has been dropping and recently it has witnessed the first plummet since the increase in March.

According to the statistics on, the exchange rate in the last weekend session ending on 10th April was 23,437 VND/USD, which is significantly lower when compared to the peak of 23,650 VND and is lower than the level of 23,550 – 23,560 VND in the middle of the week.

The dramatic decline in the exchange rate is possibly due to the impacts of the money pumping measured used by the FED to meet the global USD owning demands. This is shown via the constant declines in the Dollar index (DXY) to below 100 points last week.

In addition, the interbank USD interest rate has also continued to plummet to around 0.3 – 0.4% for the overnight and one-week terms, compared to the 1% rate that took place earlier.

The value of VND increases when compared to that of USD in the context of the recovery of several currencies in the world in the last 2 weeks. The Pound is up 6.8% from the bottom of 1,164 two weeks earlier, closing last week at the area of 1,244 USD/Pound.

Remarkably, other monetary assets have also increased again, typically gold has risen sharply, approaching the 1,700 USD / oz area, increasing by 12.5% after dropping to below 1,500 USD / oz in mid-March.

Accordingly, the exchange rate has cooled down and the SBV still has not had to use the foreign exchange reserve. By 10th April, the foreign exchange rate had increased by 1.13% compared to the beginning of the year.

The selling exchange rate in Vietcombank on 10th April was 23,520 VND and the regional buying rate was 23,310 – 23,340 VND/USD, and both of these had decreased by 130 VND compared to the beginning of the month.

The central rate on 10th April was 23,221 VND, decreasing by 13 VND compared to the beginning of the week and by 11 VND compared to the beginning of the month. Generally, the foreign currencies' liquidity is relatively stable and both the foreign exchange markets No.1 and No.2 have been working smoothly.

​>> Exchange rate escalates in the middle of the epidemic


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