Market Highlight 14.05.2024

The strong USD has prompted many governments in Asia to bolster their currency defenses since the beginning of the year. The strength of the U.S economy coupled with prolonged high policy interest rates has weakened Asian currencies. Policy makers in this region are responding to the strength of the USD at various levels, from issuing verbal warnings to raising interest rates. Some are even believed to have intervened by selling USD to buy their own currency. The Japanese government used about 60 Billion USD to intervene when the JPY weakened to its lowest level in 34 years at the USD/JPY exchange rate of 160. Meanwhile, South Korea may have used around 6 Billion USD last month in a similar move. The Indonesia’s central bank recently raised its benchmark interest rate by an additional 0,25% to curb the depreciation of the domestic currency. It seems that central banks in Asia are trying to prolong the time until the FED begins to loosen its monetary policy again, expected by the end of this year.

The USD/VND interbank exchange rate continued to track closely to the intervention selling price of the SBV at 25.450 yesterday. The ceiling price was 25.479, down from 25.485 last Friday after the central exchange rate was adjusted downwards by about 5 Dongs on Monday. There were 5 members registered to purchase USD from the SBV yesterday with a recorded volume of about 176 Million USD, bringing the SBV’s cumulative intervention selling to nearly 600 Million USD. It is expected that the market participants will continue to need additional USD support from the SBV in the coming days as domestic demand for foreign currency remains high. The U.S’s April inflation data released this week and the statement by the FED Chairman tonight will help reposition the trend of the USD in the latter half of May. Forecasts are leaning towards a temporary cooling off of inflation in the U.S.

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