Fed’s foreseen rate cuts affect foreign exchange rate

After the Fed’s move, the US dollar index (DXY) on December 19 hit nearly 108, the highest level in the past year.
Fed’s foreseen rate cuts affect foreign exchange rate
The Việt Nam’s interbank exchange rate has increased beyond the SBV’s intervention price and closed at VNĐ25,453 per dollar after Fed's latest meeting last week. Photo cafef.vn

In a meeting last week, the Fed’s officials said they now foresee only two rate cuts in 2025, down from the four they envisioned in September. The US central bank is now projecting that the federal funds rate may sit at median level of 3.9 per cent by the end of 2025, up from its earlier forecast of 3.4 per cent.

After the Fed’s move, the US dollar index (DXY) on December 19 hit nearly 108, the highest level in the past year.

The Việt Nam’s interbank exchange rate on the day increased beyond the SBV’s intervention price and closed at VNĐ25,453 per dollar, bringing the total increase since the beginning of the year to nearly five per cent.

Some local commercial banks on December 19 bought the dollar from the SBV in relatively large volumes. With the purchases, it was the first time commercial banks needed the foreign currency support from the SBV in the past five months.

Previously, the SBV also had to sell a large amount of foreign currency worth about US$6.4 billion to cool down the domestic foreign exchange rate in the period from April to early July this year, the Rồng Việt Securities Company estimates.

Since the beginning of this year, the SBV has sold about $6.5-7 billion to stabilise the foreign currency market. The move has helped curb the exchange rate increase but affected the Vietnamese đồng liquidity of the banking system.

Financial expert Dr Cấn Văn Lực forecast that the USD/VNĐ exchange rate would remain stable for the foreseeable future due to three main reasons:

First, the supply and demand for the dollar in Việt Nam is relatively good.

Second, the initial excitement of investors when President-elect Donald Trump won the vote will subside and help reduce the demand for holding the dollar for speculation.

Finally, the Fed may slow the rate cut, but will continue to maintain a loose monetary policy. This will narrow the gap between the dollar and đồng interest rates, which will help reduce pressure on the exchange rate.

Lực forecast that the đồng may depreciate by only 2.5-3 per cent against the dollar next year.

This depreciation rate is acceptable in the context that the dollar is strengthening and the world economy is forecast to have many fluctuations, Lực said.

SBV’s Governor Nguyễn Thị Hồng said that the SBV is determined to manage the foreign exchange rate flexibly, in accordance with market developments. When there are large fluctuations, the SBV will consider selling the dollar to stabilise the market and meet the dollar needs of people and businesses.

Source: VNA
vietnamnews.vn

Related News

More News

Untying the knot for green finance

Untying the knot for green finance

VCN - Green finance is a crucial resource for greening businesses. Completing the policy framework for green finance is urgently needed to unlock this capital flow.
Ensuring efficiency and transparency in use and management of houses and land at State enterprises

Ensuring efficiency and transparency in use and management of houses and land at State enterprises

VCN - According to the Ministry of Finance, the issuance of Directive on strengthening management, improving the efficiency of use and handling of houses and land at State-owned enterprises to ensure the effective management, use and handling of houses and land for the right purposes, and to avoid loss and waste.
Vietnam

Vietnam's stock market to develop strongly and sustainably

VCN - This was emphasized by Minister of Finance Nguyen Van Thang at the Conference to review the work of 2024 and deploy the work of 2025 of the State Securities Commission (SSC) held on the afternoon of December 18.
Tax sector achieves revenue target of about VND1.7 million billion

Tax sector achieves revenue target of about VND1.7 million billion

VCN – Motivated by the revenue collection by the end of December 2024, the General Department of Taxation has accomplished the revenue collection.
General inventory of public assets raises efficiency of use and management of country

General inventory of public assets raises efficiency of use and management of country's resources

VCN – The implementation of the General Inventory Project by the Ministry of Finance, ministries, central and local agencies has ensured progress according to Project 213 and the plan issued by the Ministry of Finance. This is the information provided by a representative of the Department of Public Asset Management (Ministry of Finance) at the press conference on the implementation of the General Inventory Project of public assets organized by the Ministry of Finance on the afternoon of December 18.
Publicizes progress of public investment disbursement for important national projects

Publicizes progress of public investment disbursement for important national projects

VCN – Important national projects, inter-regional transport projects, riverbank and coastal erosion treatment projects all have disbursement rates lower than the estimated average disbursement rate of the whole country, the Ministry of Finance said.
Six SOEs to be transferred back to industry ministry

Six SOEs to be transferred back to industry ministry

Six State–owned enterprises (SOEs) with a total State stake of 800 trillion VND (31.5 billion USD) will be transferred back to the Ministry of Industry and Trade (MoIT) after six years under the management of the Commission for the Management of State Capital at Enterprises (CMSC).
PM urges stronger measures to manage interest rates

PM urges stronger measures to manage interest rates

Prime Minister Pham Minh Chinh has asked the State Bank of Vietnam (SBV) to proactively, flexibly, promptly, and effectively manage the monetary policy in combination with the expansionary fiscal policy and others.
Six SOEs to be transferred back to industry ministry

Six SOEs to be transferred back to industry ministry

Six State–owned enterprises (SOEs) with a total State stake of 800 trillion VND (31.5 billion USD) will be transferred back to the Ministry of Industry and Trade (MoIT) after six years under the management of the Commission for the Management of State Capital at Enterprises (CMSC).
Read More

Your care

Latest Most read
Fed’s foreseen rate cuts affect foreign exchange rate

Fed’s foreseen rate cuts affect foreign exchange rate

After the Fed’s move, the US dollar index (DXY) on December 19 hit nearly 108, the highest level in the past year.
Untying the knot for green finance

Untying the knot for green finance

VCN - Green finance is a crucial resource for greening businesses. Completing the policy framework for green finance is urgently needed to unlock this capital flow.
Ensuring efficiency and transparency in use and management of houses and land at State enterprises

Ensuring efficiency and transparency in use and management of houses and land at State enterprises

VCN - According to the Ministry of Finance, the issuance of Directive on strengthening management, improving the efficiency of use and handling of houses and land at State-owned enterprises to ensure the effective management, use and handling of houses an
Vietnam

Vietnam's stock market to develop strongly and sustainably

VCN - This was emphasized by Minister of Finance Nguyen Van Thang at the Conference to review the work of 2024 and deploy the work of 2025 of the State Securities Commission (SSC) held on the afternoon of December 18.
Tax sector achieves revenue target of about VND1.7 million billion

Tax sector achieves revenue target of about VND1.7 million billion

VCN - With the determination to accomplish the revenue collection to create resources for economic development under the Prime Minister's direction, the entire Tax sector has made efforts to perform the revenue collection in the last days of 2024.
Mobile Version