The exchange rate may increase at the range of 2% - 4% in 2017

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Although there are certain changes from time to time, 2016 was recognized as a relatively stable year of the exchange rate and foreign exchange markets. At the end of March 12-2016, common rates at 22.790 to 22.800 VND/USD, increased by 1.1% compared to the end of 2015.

This increase mainly came from early November, due to pressure from the unexpected results of the US presidential election with the winning of Donald Trump - the Republican candidate and the interest rate increase by FED in December which comes with the oriented roadmap to raise interest rate sharper than expectation in 2017. Along with that, the pressure from the significant raise of dollar price on the world market and seasonal factors at the end of the year to meet payment demands is also high.

Since early 2016, the State Bank has formally adopted a new operating mechanism with daily central exchange rate determined based on the reference of the weighted average exchange rate on interbank market and the rate on international market of some currencies of countries which have large trading, borrowing, repayment, investments relations to Vietnam together with the macro-economic balance, currency, monetary policy objectives.

Accordingly, before the heating up of the exchange rate in the commercial banking system, since mid-August, the central reference rate is continuously adjusted by the State Bank. This movement is considered as a flexible adjustment from the authorities to orient and wait the market in front of the considerable pressures on the exchange rate and the foreign exchange market which was expected to happen at the end year as above noted.

Experts of Vietcombank Securities Company (VCBS) assessed, in 2017, the pressure from the outside and the world market will continue to be the biggest factor which put pressure on the exchange rate and foreign markets exchange with the center being the strengthening of the US dollar accompanied by the recovery of the US economy and the FED's interest rate increase roadmap with the expected time of rate increase more than in 2016. Along with that is the sharp decrease of many other foreign currencies in the area.

Besides, when the world market has more events and volatility, speculative sentiment is likely to appear. This will create a certain pressure on the market in the short term and require the State Bank to have the appropriate, flexible and close operating decisions.

Meanwhile, experts also maintain the expectation that the supply of foreign currencies in 2017 will be at an abundant level and continue to be a strong support factor for the exchange rate. Except for the US, many big countries in the world, especially in Asia, are maintaining quite strong expansionary policies. Accordingly, with the advantage of economic and politic stability, relative geography, Vietnam is forecast to continue to be a bright spot to attract investment capital. Furthermore, 2017 will be the year with the process of equitization, divestment of state capital which will continue, especially in the major corporations with foreign investor interest. This movement promises to bring a large supply of foreign exchange for Vietnam in the incoming period.

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On that basis, although the VND in 2017 is likely to come with more pressure than the previous period, but with the prospects of abundant supply of foreign exchange will help the State Bank to be more active in managing and stabilizing the market when necessary. Accordingly, VCBS predicts the devaluation rate of VND in 2017 will be around 2% - 4%.