Market Highlight 22.10.2026

Global USD supply could come under greater pressure as the FED begins raising interest rates, with two traditional sources of USD liquidity - the Gulf region and China - slowing. In the past, Gulf countries typically recycled surplus oil revenues into overseas investment and lending. Currently, despite higher oil prices, disruptions to shipping through the Strait of Hormuz and damage to energy facilities have sharply reduced oil export volumes. These countries also need to retain more funds for reconstruction, higher defense spending, and domestic economic support, leaving less USD capital available to global markets. Meanwhile, China is increasingly promoting lending in CNY rather than USD as part of its renminbi internationalization strategy. These shifts are taking place at a time when U.S technology companies involved in AI require significantly more funding to finance infrastructure investment. If global USD supply becomes constrained, borrowing costs could rise, particularly if tensions in the Middle East continue to escalate. In such a scenario, the U.S Central Bank may need to act quickly, as it did in 2020, to provide liquidity through USD swap arrangements with other major Central Banks.

The USD Index edged lower on Wednesday as markets weighed inflation risks driven by elevated oil prices against the outcome of next week’s Federal Reserve meeting. Markets continue to expect the FED to keep its policy rate unchanged on 28/10, while placing greater emphasis on the possibility of further monetary tightening at the early-December meeting.

Interbank USD/VND fell by another VND 20 yesterday, in line with the weaker USD in global markets, while the domestic market lacked a clear directional catalyst. The SBV lowered the effective daily ceiling to 26.915.

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