Macro/ Strategy

On March 20, FED kept federal interest rates unchanged at 5.25% - 5.5% and expected to cut 3 times (0.75%) by the end of this year if inflation is sustainably declining toward its 2% target. DXY had its second consecutive weekly increase to 104.43 (+3.04%YTD) on Friday (March 22) in response to diverged monetary policies of world central banks. The domestic exchange rate also increased rapidly in the past two weeks, therefore, SBV has proactively withdrew a net of VND 144.7 trillion on OMO in 10 consecutive days from March 11 to March 22, 2024 and still has room to continue in the next few days to stabilize exchange rate.

DXY is forecasted to continue its rising momentum to recent peak of 104.95, or even higher at 107.04 before the next move of FED. Therefore, the pressure on USD/VND in the short term still remain but is expected to cool down in the second half of 2024 and VND devaluation will be less than 3% for the whole year 2024 thanks to (1) consensus prospect of interest rate cuts from FED and major central banks around the world in the coming time after Swiss Central Bank (SNB)'s action, (2) Vietnam's FDI and exports are recovering strongly and support foreign currency supply; (3) impact of SBV's net withdrawal through OMO in March 2024 and flexible mechanism on operating forward exchange rate approved.