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BVSC: VND has depreciated by 2.2% against USD but is still the best currency in the region

05/08/2022

According to the newly released macroeconomic report of Bao Viet Securities (BVSC), the VND continued to depreciate by 0.38% against the USD in July. Compared to the end of 2021, the VND has also depreciated by 2.21 %. Meanwhile, in the world market, the DXY index - a measure of the greenback's strength - added 0.76% in July and 10.7% since the beginning of the year.

BVSC's monitoring shows that all currencies in emerging countries in Asia are still declining against the USD. In which, the Thai Baht has seen the strongest decrease, with 9.42% since the beginning of the year; and VND has recorded the lowest decrease, 2.21%.

According to BVSC, after the policy meeting in July, the FED decided to raise interest rates by 75 basis points (bps) for the second consecutive month. The USD has at times appreciated by approximately 13%, reaching the highest level in the past 20 years, before cooling down towards the end of the month. Meanwhile, from the beginning of July, the SBV raised the USD selling rate for the second time this year, from 23,250 by 150 VND, to 23,400 VND/USD, and changed the selling method from 3 months to spot.

According to BVSC, the current devaluation pressure of the VND is mainly due to the strong appreciation of the USD, while Vietnam still maintains a stable macro-economy, low inflation, positive real interest rates, trade surplus, and high foreign exchange reserves. Therefore, the analysis team predicts that, with the internal strength and flexible management measures of the State Bank of Vietnam, it is likely that the VND will not depreciate more than 3% in 2022.

In terms of interest rates, as of the end of July, according to BVSC, rate of 12-month deposits continued to increase by 0.07 percentage points to 5.77%. Thus, the deposit interest rate has increased by 0.18 percentage points over the same period and 0.23 percentage points compared to the end of 2021. The increase in deposit interest rates compared to the end of 2021 has been somewhat more pronounced and came from all groups of banks.

According to the State Bank, credit growth as of July 26, 2022 reached 9.42%, the highest increase of seven months in the past five years. However, credit growth slowed down significantly in July, when it only increased by 0.07 percentage points compared to the end of June, because commercial banks have reached their credit limit while the State Bank has not expanded room for credit.

 

Kylie Nguyen

© 2019 Vietnam Bank for Agriculture and Rural Development No. 2 Lang Ha street, Ba Dinh district, Hanoi, Vietnam
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