Fed rate hike could pressure exchange rate

December 16, 2016 | 09:11

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In a long anticipated move, the US Federal Reserve decided Wednesday to raise the benchmark interest rate by a quarter percentage point to 0.5 per cent, marking the first hike since December 2015 and only the second in a decade.

At Vietcombank, the buying rate is listed at VND22,700 and the selling rate at VND22,770 for one US dollar, both up VND40 from Wednesday. - Photo vnmedia.com

The move is unlikely to shock the Vietnamese economy and monetary market, Nguyễn Đức Thành, Director of the Việt Nam Institute for Economic and Policy Research, told cafef.vn., though it is likely to place pressure on foreign exchange.

He said the trend had been anticipated worldwide for most of the year, but given that the dollar’s value is expected to increase compared to other currencies. the Việt Nam đồng would depreciate like other currencies, he added.

On the positive side, Việt Nam’s foreign reserve of $40 billion is at a record high, so the country will benefit from the dollar’s appreciation, Thành added.

The State Bank of Việt Nam yesterday revise up the VND/USD reference exchange rate by 11 đồng from December 14 to touch VNĐ22,135 per US dollar.

With the current trading band of +/- 3 per cent, the ceiling rate applicable for commercial banks during the day is VNĐ22,799 and the floor rate is VNĐ21,471 for one US dollar.

The rates listed by commercial banks at the opening hour saw light fluctuations.

Yesterday, the Bank for Foreign Trade of Việt Nam offered a buying rate of VNĐ22,700 and a selling rate of VNĐ22,770 for one US dollar, both up 40 đồng from the previous day.

The Asia Commercial Bank listed its buying rate at VNĐ22,690, up 20 đồng, and the selling rate at VNĐ22,780, up 30 đồng from Wednesday.

Domestic gold prices yesterday also plummeted by VNĐ200,000-250,000 per teal from Wednesday’s level.

VNS

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