Dollar's gain against dong to be short-term: analysts

By Minh Son, Hong Thao   September 21, 2023 | 03:12 pm PT
Dollar's gain against dong to be short-term: analysts
An employee counts U.S. banknotes at a bank in Hanoi. Photo by VnExpress/Giang Huy
The U.S. dollar has been gaining against the Vietnamese dong in recent weeks, but the trend will likely be short-term and not as substantial as last year, analysts say.

The dollar rose to a new peak against the dong this year, hitting VND24,550 this week, and has risen around 3% since the beginning of the year at Vietcombank.

"Many are concerned about the gain of the dollar, but I do not think it will rise as strongly as last year," said Nguyen The Minh, director of analysis at Yuanta Securities.

The dollar rose at some point by 8.5% against the dong last year to 24,900 before declining in the last month of the year.

The surge came after the State Bank of Vietnam (SBV) widened the dong-dollar trading band from 3% to 5% a day and allowed the dong to depreciate as global central banks tightened their monetary policies.

But the gain of the dollar this year, according to Minh, is different, as it has mostly been caused by the short-term rise of inflation in the U.S.

The U.S. dollar index, which measures the strength of the greenback against major currencies, remained strong at over 105 points.

Analysts from stock brokerage firm SSI Research also said in a recent note that the rise of the greenback will be short-term and that recent increases only reflected global developments.

The State Bank of Vietnam has been able to increase its foreign exchange reserve in the first six months.

The supply of foreign currency from the disbursement of foreign direct investment companies in the first eight months ($13.1 billion) and the trade surplus of $19.9 billion have also been seen as positive signs.

Dragon Capital chief investment officer Le Anh Tuan anticipated the USD/VND exchange rate would fluctuate along a band of 2% from now until the end of the year.

Although foreign investors have not been selling recently, Tuan said the trend might be short-term as investors have wanted to take profits from a market that has been posting strong gains since the beginning of the year.

"In the long run, the recovery of the economy, the stable exchange rate, and improvements in policies will attract foreign investment on the stock market."

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