[NEWS] – Looking back at a "fluctuation" year of the exchange rate

The year 2022 marks a strong appreciation of the dollar in the global financial market, due to the rapid and robust interest rate hike of the US Federal Reserve (Fed). The USD/VND exchange rate was also under increasing pressure.

The Fed raises interest rates drastically, the dollar flies high

From February 2022, global inflation pressure increased due to the conflict between Ukraine and Russia, creating a great shock in the commodity market accompanied by supply chain disruptions, making the commodity price level only maintained at a high level. US inflation at the highest level in 4 decades became the fire that sparked the USD price to peak in 2022, to the highest level in 20 years.

In the face of the heat of inflation, the Fed decided to raise interest rates by 0.75 percentage points in a row four times in the past year - the Fed’s toughest move since Paul Volcker’s era in the early 1980s. In 2022, the Fed raised interest rates from 0.25% to 4.5% or 4.25 percentage points.

On the other hand, investors still look to the USD as a haven instead of the Euro because of less positive expectations about the economic outlook of the EU - the economy is directly affected by the conflict with Russia - Ukraine.

USD/VND exchange rate broke the peak

The USD appreciates and maintains relative strength against other currencies and VND is no exception. Meanwhile, the supply of foreign currency has not been too favorable compared to previous years, in the context that Vietnam imports raw materials during the period of high prices. Therefore, the central exchange rate of the Vietnamese Dong to the USD reached the highest level ever, reaching 23,703 VND/USD in the session of October 25, 2022. Along with that, the listed exchange rate at Vietcombank jumped to 24,692 VND/USD (buying in) and 24,872 VND/USD (selling out). This is also the highest USD price listed by Vietcombank since 2000.

USD selling price increased sharply, widening the band

Facing the heat of the greenback in the international market, the State Bank of Vietnam (SBV) has taken drastic action to "balance" the exchange rate. In the past year, the State Bank has adjusted the list of selling prices 6 times. Spot USD with a substantial increase, is about to reach the threshold of 25,000 VND/USD.

From the beginning of the year until now, the selling price of USD from the SBV’s Exchange has increased by a total of 1,720 VND/USD, equivalent to an increase of 7.4%.

In addition to sharply increasing the USD selling price at the Exchange, the operator also decided to adjust the USD/VND spot exchange rate band from ±3% to ±5% from October 17. This is the first margin adjustment of the SBV after 7 years.

After a period of strong increase in the selling price of USD, from December 16, the operator reduced the price to 23,780 VND/USD and maintained this price until now, when the USD price in the international market plummeted, to the level at least 6 months ago. Accordingly, the USD-Index dropped to 104.8 points, equivalent to a decrease of more than 8% compared to the peak of 114.19 points on September 27, 2022.

Source: Collector