Although the exchange rate has experienced strong fluctuations since the beginning of the year, with foreign exchange sources from trade surplus, FDI disbursement and abundant remittances, this year's exchange rate would only increase by about 1.5%.

According to a report from KBSV, the USD/VND interbank exchange rate returned to its peak at the end of October 2023, reaching 24,648 at the end of February, an increase of 1.56% compared to the beginning of the year.

The increase in exchange rates comes from factors such as: the USD Index (DXY) continues to strengthen; Pressure from the USD - VND interest rate difference still exists and a large amount of foreign currency flows out of the system to serve businesses' import of goods and raw materials at the beginning of the year. Meanwhile, foreign currencies earned from export enterprises have not immediately returned to the system.

KBSV also assessed that the US January PCE data did not show any surprises as they decreased in line with market expectations. Specifically, January PCE reached 2.4%, core PCE decreased to 2.8% and is the lowest PCE level since April 2021.

However, there are the first signs that inflation may return. Service prices measured by ISM Services Prices increased sharply to 64 points in January from 56.7 points in December 2023. NFIB's survey on the possibility of increasing selling prices of businesses shows that in the past three months the probability has increased from 20% to 40%.

Therefore, KBSV experts realize that the risk of US inflation may continue to increase DXY, putting pressure on exchange rates in the near future.

On the contrary, import-export activities and FDI capital flows continue to grow positively, which is a factor supporting the exchange rate. Registered FDI capital as of February 20 reached USD 4.29 billion (an increase of 38.6% over the same period last year). Meanwhile, realized foreign direct investment capital in the first two months of the year is estimated at USD 2.8 billion (an increase of 9.8% over the same period) and is the highest level in the past 5 years.

Total import-export turnover in the first two months of the year reached USD 113.96 billion, of which exports reached USD 59.34 billion (an increase of 19.2%) and imports reached USD 54.62 billion (an increase of 18%). In the first two months of the year, Vietnam's trade surplus reached USD 4.2 billion. Although the activities of domestic enterprises have improved, there is still a trade deficit of USD 3.53 billion.

However, analysts from KBSV believe that exchange rate will only increase by 1.5% this year, reaching VND 24,600 per USD due to the overall balance forecast being more positive, in the context of negative interest rate difference between USD and VND, although decreasing, still remains throughout the year.

Kylie Nguyen