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Banking & Finance

Exchange rate predicted to rise

Released at: 16:17, 28/07/2015

Exchange rate predicted to rise

BIDV report forecasts rise from VND21,800 to VND21,890 per US dollar before year's end.

by Minh Tuyet

The foreign exchange market is predicted to be stable in the third quarter then fluctuate strongly in the fourth quarter, according to a report from BIDV on the foreign exchange market. The rate will rise from VND21,800 to VND21,890 per US dollar, the report states.

The average rate at banks is VND21,687, with most buying and selling at VND21,780 to VND21,840.

The role of State regulation is a key factor in stabilizing the market. The State Bank of Vietnam (SBV) often calls for stable foreign exchange rates and says it is willing to intervene to balance supply and demand, as foreign reserves have improved significantly in recent years. BIDV said that the SBV could sell $5 to $6 billion, equal to the trade deficit, to offset any major fluctuations.

The BIDV report also noted some shocks that may influence the foreign exchange rate. In the first scenario, economic recovery will be weaker due to fluctuations in Asia and Europe, so exports may not be as good as expected. In the second scenario, the domestic economy will grow dramatically and demand for imports will increase sharply. The trade deficit, in such a case, would be around $1 billion per month.

If the SBV does not extend Decree No. 43 on foreign exchange loans into 2016, it would put pressure on demand for foreign currencies to pay outstanding loans, which would affect exchange rates.

The balance of payments, meanwhile, is forecast in the report to be in surplus in the second half of the year, at $3 billion. The trade deficit, however, will be maintained, coming in at between $3 billion and $4 billion. Foreign direct investment, foreign indirect investment, and ODA are all predicted to be healthy.

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