Market Highlight 07.01.2025

The USD declined sharply in early-week trading following mixed signals about the aggressiveness of President-elect Donald Trump’s proposed tariff schedule when he takes office on January 20. The USD Index fell 1,07% yesterday against a basket of major currencies after reports indicated Trump’s advisors are considering imposing tariffs on most countries - but only in sectors deemed critical to U.S security or the economy - easing recent concerns about more extensive and higher U.S tariffs. This scenario could prompt a 2 - 4% depreciation of the USD, as tariff tensions between the U.S and several major economies would be less severe than initially feared.

The USD Index reached a two-year high of 109,54 last week, marking its fifth consecutive weekly gain. The rally has been underpinned by the robust recovery of the world’s largest economy, the possibility of higher inflation induced by tariffs, and a slower pace of interest rate cuts from the Federal Reserve. However, a report from Bloomberg suggests that U.S GDP could drop by 0,8% in 2028 if only China retaliates against tariffs and by 1,3% if other nations also raise levies on U.S goods. Notably, U.S economic data released yesterday showed that new orders for U.S.-manufactured goods fell in November, while business spending on equipment also appeared to slow in Q4.

Domestically, the USD/VND exchange rate declined to 25.380 yesterday, aided by unified selling pressure in both the interbank market and from local businesses. Historical patterns indicate that the exchange rate often weakens ahead of the Lunar New Year, as the market shifts focus to VND liquidity in preparation for the extended holiday period. The exchange rate is forecast to extend its decline further, potentially dipping below 25.350 today.

Asia Commercial Joint Stock Bank assumes no responsibility or liability for any purpose of reference or using the information provided by this newsletter.

Directly contact us to receive market news and consultancy on foreign exchange products and derivatives:

- Financial Markets Division – Email: ktttc@acb.com.vn ; or

- Mr. Khanh Hoang (Financial Markets Senior Analyst) – Email: hoangnk@acb.com.vn