On the afternoon of 11/10, numerous free market foreign exchange points in central Ho Chi Minh City were buying the USD at around 25,900 VND, an increase of 50 VND compared to yesterday and 250 VND higher than bank rates. For selling, transactions were commonly around 26,200 VND, slightly higher by 130 VND compared to major banks. Overall this week, the free market USD price increased by 150-250 VND.
In the banking channel, leading institutions such as Vietcombank, Vietinbank, and BIDV maintained unchanged rates over the weekend. The latest listed rates were 25,660 VND for buying and 26,070 VND for selling, a decrease of 100 VND compared to last weekend. This adjustment aligns with the trend of the central exchange rate announced by the State Bank of Vietnam.
This marks the first time in 4 months that the free market USD rate has surpassed banks for both buying and selling. According to an employee at a foreign exchange agency on Ho Tung Mau street in Ho Chi Minh City, the primary reason for the higher free market USD rate, beyond banks not adjusting weekend rates, is seasonal demand. The final three months of the year typically see a strong increase in foreign currency transaction demand, leading to larger and more frequent price adjustments.
The free market offers flexible transactions and more clearly reflects public expectations regarding exchange rates. The shift of the USD from being lower than to higher than bank rates indicates a resurgence of speculative sentiment and foreign currency holding.
Previously, from mid-June, the free market USD price had fallen significantly, trading approximately 50-350 VND lower than bank rates, depending on the period. Experts attributed this unusual situation to several factors.
Foreign exchange activities at gold shops faced tighter scrutiny due to inspections, causing both supply and demand to contract. Additionally, attractive VND interest rates, maintained at 8,5-9% per year, prompted many to shift from holding USD to depositing VND savings. The narrowing gap between domestic and international gold prices also reduced the demand for accumulating foreign currency for gold smuggling.
Experts forecast that exchange rates in the free market could fluctuate sharply in the final quarter of the year due to seasonal factors, while the banking channel is expected to be more stable. "We believe that the domestic exchange rate currently has a relatively good buffer against external shocks and a relatively high degree of stability compared to most regional currencies", an expert from VNDirect Securities Company commented.
According to Techcombank's analysis team, the exchange rate could remain around 26,000 VND from now until year-end. The VND is projected to depreciate by only about 0,8% compared to the end of last year, thanks to supporting factors such as the interest rate differential between VND and USD, positive foreign direct investment (FDI) inflows, and stable remittance inflows in the final months of the year.
The biggest risk, according to Techcombank, is the U.S. Federal Reserve (Fed) maintaining a tighter monetary policy than expected, which would strengthen the USD and pressure the VND.
At a recent press conference, Pham Chi Quang, Director General of the Monetary Policy Department (State Bank of Vietnam), stated that the VND has appreciated against the USD, even as many Asian currencies and other major currencies like the Japanese yen, Malaysian ringgit, Philippine peso, Indonesian rupiah, Indian rupee, euro, Swiss franc, and British pound have depreciated by 2% to 7%.
Phuong Dong
