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Greenback changes little despite Fed rate hike

Hong Phuc
Friday,  Jun 16,2017,23:33 (GMT+7)
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Greenback changes little despite Fed rate hike

Hong Phuc

HCMC – Although the U.S. Federal Reserve (Fed) raised rates by 25 basis points, the Vietnam dong-U.S. dollar exchange rate saw little change, with the greenback firmer against the domestic currency before quickly stabilizing given supportive macro factors.

On Wednesday, strong foreign currency buying sent the dollar up on the local market as people were expecting the Fed’s rate hike decision and a subsequent response by the State Bank of Vietnam. However, the dollar declined shortly after the decision was made on June 15.

The inter-bank rate was VND22,695 per dollar in the morning, down VND8 against Wednesday. Local banks quoted the dollar at VND22,725 per dollar, dropping VND10 versus the previous day, before revising it down to VND22,690-22,695 in the afternoon.

On the informal market, the dollar was sold at VND22,700, which was unchanged from Wednesday afternoon.

Meanwhile, the central bank cut the central rate by VND3 to VND22,405 per dollar, allowing banks to trade the dollar in a range of VND21,718 and VND23,801.

According to bankers, the Fed decision caused little change to the dollar price as the nation has had huge liquidity in foreign currency and dong. Besides, the domestic currency is backed by some macro-economic factors.

Before the Fed meeting, expectations for the Fed rate rise and the State Bank of Vietnam’s  response, coupled with speculative factors, had led banks to increase dollar buying.

Banks had maintained a strong buying position for two days. However, after the Fed raised rates on June 15, the dollar price was seen stabilizing thanks to large foreign investments into Vietnam and big foreign currency holdings at big companies and banks, a foreign currency trading expert at a local bank told the Daily.

According to the expert, the dollar appreciation was mainly driven by speculative factors rather than real market demand. Therefore, the macro-economic factors are still supporting the dong-dollar exchange rate stability.

Due to speculation, some banks wanted to sell foreign currency following the Fed rate hike, so the dollar might decline in the next few days, even on the informal market.

Dollar lending rates were almost unchanged on the inter-bank market, staying at 2.2% per year for the overnight tenor, 2.5% for one week, 3.6% for one month and 2% for three months.

On the global market, the dollar also weakened slightly against other currencies.

Meanwhile, Vietnam dong lending rates on the inter-bank market dropped, having gone up slightly by 10-20 basis points at tenors from overnight to three weeks two days ago. The lending rate for the overnight term was 2.13% a year, 2.43% for one week, 2.93% for two weeks and 3.43% for one month.

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Giấy phép Báo điện tử số: 321/GP-BTTT, cấp ngày 26/10/2007
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