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Saturday, June 22, 2024

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Reining in Vietnam dong weakness

The interest rate differential between the Vietnamese dong and the U.S. dollar has placed the foreign exchange rate under pressure since 2022. Nguyen Duc Hung Linh, founder and consulting director of Think Future Consultancy, discussed solutions for the current exchange rate dilemma in an interview with The Saigon Times. EXCHANGE RATE AND INFLATION The Saigon Times: Since early 2024, the dong-dollar exchange rate has turned volatile, even though the U.S. Dollar Index, after a strong increase in early 2022, has stabilized. So far this year, the index has only increased by 2.3%, while the dong has depreciated by 7.4% against the greenback. What has led to this situation? If the dong fall continues, what will be the impact on macroeconomic stability? Nguyen Duc Hung Linh: The interest rate differential between the Vietnam dong and the U.S. dollar has put pressure on the exchange rate since 2022. Interest rates are a fundamental factor affecting the value of a currency. While most countries have increased their policy rates to put inflation under control and protect their currencies, Vietnam has loosened its monetary policy by lowering interest rates. In 2024, as Vietnam’s economic recovery has gained steam, the import demand has risen as […]
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