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Following the movement from the end of 2016, the central reference exchange rate continued to be gradually raised by the State Bank of Vietnam (SBV) in the first two months, as of March 21, 2017, it was listed at 22,254 VND/USD, up by 0.43% from the beginning of the year and up by 1.85% over the same period in 2016.

Meanwhile, the exchange rate of the commercial bank system recognized more movements when declining sharply in January, 2017 and had signs of heating up again from mid-February, 2017. At present, the selling rate at many commercial banks is around 22,820 VND/USD.

Explaining the different movement between the central exchange rate and exchange rate of the commercial banking system, a VCBS expert said that with the view of operating agency, the gradual increase in the central rate could be seen as a flexible approach and preparedness for the pressures of the exchange rate in 2017. Especially, the USD is becoming stronger and the US economy has recovered and the roadmap of interest rate increase is forecast to be much faster than last year.

From the second half of February 2017 onwards, due to the trade deficit surged back and psychology of speculation when the USD is becoming stronger in the global market with the expectation that the Fed would raise interest rates early in March, 2017 and the exchange rate in the commercial banking system would increase rapidly again. Then, when the result of the FED’s meeting was officially announced with the decision on raising interest rates as expected, along with the devaluation of the USD on the global market, the domestic exchange rate also reduced but remained at a relatively high level compared to the beginning of the year as mentioned above.

The movement of exchange rates and foreign exchange market in the first months of 2017 have shown that the exchange rate in 2017 is under more pressure than last year. VCBS experts pay special attention to the context of a strong USD when it is supported by the roadmap of interest rate increase of the FED.

Although official statements and announcements from FED officials have shown more caution in the process of interest rate increase than expectations and forecasts of the market, it was clear that compared to 2016, this process is likely to perform faster and more frequently.

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In addition, when the trend of the depreciation of the VND has been expected and greatly correlated with the fluctuations in the global market, the psychology of speculation will grow and become a factor causing significant pressure to exchange rates and the foreign exchange market.