HANOI (Vietnam News/ANN): After being relatively stable last year, the foreign exchange rate of the Vietnamese đồng against the US dollar is forecast to be under greater pressure in 2020 due to both internal and external headwinds.
Finance expert Nguyễn Trí Hiếu told Vietnam News that pressure on the exchange rate would be bigger this year as a greenback supply decline in the domestic market is forecast, driven by weaker foreign direct investment inflows and exports.
Vietnam received US$38 billion in total registered investment capital last year, up 7 per cent from $35.5 billion in 2018. The processing and manufacturing sector continued to attract the bulk of FDI at $24.6 billion, which accounted for 64.6 per cent of investment capital in 2019. Moreover, as US President Donald Trump wants to use the trade war to gain an advantage over his opponent in his re-election campaign, the war cannot end in 2020, Hiếu said, adding this would continue to have a strong impact on the US dollar and Chinese yuan in 2020, putting pressure on the đồng.The đồng remained relatively stable against the dollar last year, with the SBV’s reference exchange rate up some 1.45 per cent against the end of the previous year.
“That said, we believe that the State Bank of Vietnam will seek to limit the pace of đồng weakening as Vietnam remains on the US Treasury’s currency manipulator watchlist at its January 2020 report, ” Fitch analysts told Vietnam News, adding though they viewed the US taking punitive measures against Vietnam as a quite unlikely scenario.
The US Treasury adds a country to its currency manipulator watchlist if it meets two of three criteria: trade surplus with the US of at least $20 billion, current account surplus of at least 2 per cent of GDP and persistent, one-sided intervention in the currency equivalent to 2 per cent of GDP in six months of a year.
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