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Wednesday, June 19, 2024

Inflation worries amid exchange rate volatility

By Khanh Nguyen

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The possibility of the first interest rate cut in 2024 by the U.S. Federal Reserve (Fed) is now low as inflation in the U.S. showed signs of rebounding in Q1/2024. The pressure on the exchange rate between the U.S. dollar and the Vietnam dong, coupled with inflation concerns, requires appropriate coping policies. Exchange rate developments A Q1/2024 report, titled “Vietnam Economic Outlook 2024: Maintaining Macroeconomic Stability and Creating Momentum for Recovery,” by the Macroeconomic Research Group of the Vietnam Institute for Economic and Policy Research (VEPR) underlined concerning signs regarding exchange rates in the early months of 2024 and the subsequent period. As of the end of April 2024, the U.S. dollar had increased by 4.4% against the Vietnamese dong compared to the beginning of this year. Meanwhile, inflation in the U.S. showed signs of rising in Q1/2024. This came at a sensitive time of the U.S. Presidential election. Tight monetary policy might be what the Fed favors to slow inflation. A stronger U.S. dollar has led to the U.S. “exporting” inflation globally, allowing foreign goods to be imported into the U.S. at lower prices. Maintaining a strong dollar as a guarantee that the U.S. remains the largest economy in […]
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