According to many economic experts, in the near future, the pressure of exchange rate will be significant if the economic and political tension in the world has not decreased.
According to the analyst Nguyen Tri Hieu, before Tet, the remittance source “flowed” very plentifully, thus “pushed” the exchange rate to a low level or kept the exchange rate stable. After Tet, the source of remittances fell sharply, which raised the exchange rate slightly.
Along with that, import and export activities also started at the beginning of the year, increasing the demand for foreign exchange, thus reducing the supply and increasing slightly the demands. Regarding the exchange rate evolution in the short term, Hieu analysed, the US-China trade war had not come to an end, there were many influences and impacts on the global market, thereby putting pressure on the exchange rate and VND.
At the same time, the value of the dollar remained high, in the crisis context of the US-China trade war, the market still considered the US dollar as a strong currency in the world, which resulted in the exchange rate pressure.
From the above analysis, Hieu stated that within the next three months, the exchange rate might be stable, however, depended heavily on the US-China trade war. At this point, if negotiations between the two sides reached an agreement, the trade war would cool down, reducing the pressure on the exchange rate then.
On the other side, in the next 60 days, if this war comes to a standstill, it will put pressure on the dong, as the Chinese yuan may continue to be devalued to face the trade war. It will also put pressure on exchange rates, VND and US dollar devaluation.
In the long term, Hieu said that in 2019, the exchange rate could increase to three per cent.
Sharing the same view, economic expert Bui Quang Tin also said that after Tet, basically, the exchange rate was stable, not much fluctuated. However, in the near future, the pressure of exchange rate would be considerable when the economic and political tension in the world had not eased.
Besides, the US-China trade talks have not come to an end and it is likely that the “trade story” between the two countries will last for several more years. At that time, the problem of applying taxes or the tactics applied by the People’s Bank of China (PBoC) in monetary policy related to the devaluation of the Chinese yuan will happen again.
According to Tin, this year, if the tension of the trade war between the two largest economies in the world is not resolved ultimately, it is more likely that the Chinese yuan will continue to be devalued, creating pressure on other currencies, which then puts pressure on exchange rates and VND.
“In addition, inflation is also one of the direct impacts on exchange rates and interest rates. When interest rates rise, it will put pressure on inflation, the exchange rate is a two-way problem. So, in 2019, the exchange rate will be more pressured than 2018,”said Bui Quang Tin.
With that judgment, Tin is concerned that if the exchange rate increases suddenly, it will cause difficulties for businesses because many businesses are afraid to buy derivative contracts on exchange rates. If the exchange rate goes up by more than 2.5 percent or more than three per cent as in 2018, businesses will cope with many risks.
Therefore, economists recommend that enterprises should buy the future contracts, which will ensure that they can buy or sell a certain amount of foreign currency at the price they negotiate and finalise with the banks in advance. This is the best way to minimise the risk of exchange rate fluctuations affecting the financial situation of the businesses.
