From Oct 30 to Nov 13, the US dollar index (DXY) rose from 101.88 to 103.22, about 1.3%, reaching roughly a 19-month high. Over the same stretch, the USD/VND rate slipped from VND 25,803.5 to VND 25,725.5, about 0.3%. The dollar got stronger worldwide, but Vietnamese buyers at the bank counter have not yet paid correspondingly more.
That gap gets tested during the week of Nov 16–19. Mr. Kevin Warsh, Chair of the Fed (the US Federal Reserve), is due to speak at midnight on Nov 17 Vietnam time. US retail sales for October come out at 8:30 p.m. the same day, and the minutes of the Fed's October meeting are released at 2 a.m. on Nov 19. Together they should show whether the market is right, or has overshot, in betting on a Fed rate hike in December.
Why the global dollar had its strongest week in over a month
The main driver is the expectation of Fed tightening. US consumer price inflation (CPI) for October rose 0.4% month on month, above the 0.3% forecast.Bnews It was the third straight month of CPI beating forecasts.Bnews Before the data came out, Mr. Christopher Waller, a member of the Fed's Board of Governors, had raised the possibility of a 50 basis point hike in December if October core CPI rose around 0.3% or more.Thời báo Tài chính Việt Nam
The Fed's policy rate stands at 3.75%–4%, held at the Oct 28 meeting by a 10-2 vote. Two members dissented because they wanted a hike right away.Nation Thailand The next meeting is on Dec 8–9.CNBC
Markets already treat a December hike as nearly settled. According to CME Group's FedWatch tool, as reported by CNBC on Nov 13, the chance of a 25 basis point hike is almost 87%, and of a 50 basis point hike about 13%.CNBC The 2-year US Treasury yield, the one most sensitive to Fed policy, climbed 34 basis points on the week to about 4.87%.Bnews
That changes what next week is about. Whether the Fed hikes in December has largely been answered by the market. What remains open is whether it is 25 or 50 basis points, and whether a January move follows. With the dollar already priced for a fairly tight path, even a slightly softer signal could take away some of its support.
Bank dollar prices follow, but more slowly
During Nov 9–13, the dollar price in Vietnam did rise. On the morning of Nov 10, Vietcombank quoted USD at VND 25,340–25,720 (buy – sell).VietnamFinance On the morning of Nov 13 it was VND 25,460–25,870.Bnews At the close of the week Vietcombank quoted VND 25,500–25,910, up VND 130 from the previous week's close.Thời báo Tài chính Việt Nam
Set side by side, the domestic gain is smaller. From Nov 6 to Nov 13, DXY rose from 102.30 to 103.22, about 0.9%. Vietcombank's selling rate rose VND 130 on a base of roughly VND 25,780, about 0.5%. The USD/VND rate went from VND 25,582.5 to VND 25,725.5, about 0.56%. Put differently, local prices have covered only around half the distance of the dollar index.
This week's domestic rise was not only about the Fed. VietnamFinance argues that dollar prices stopped falling from the afternoon of Nov 10, after the State Bank of Vietnam announced it would buy spot USD at VND 25,500 on Mondays and Wednesdays each week.VietnamFinance Meanwhile, Thời báo Tài chính Việt Nam ties the Nov 13 rise to US inflation and the Fed's hawkish signals.Thời báo Tài chính Việt Nam The two events fell within the same few days, so the available data cannot separate how much came from the Fed and how much from domestic action. The reasonable reading is that both pushed together.
The slowing force on local prices is real. VCBS points to foreign currency supply backed by FDI, exports, international tourism, and banks and companies raising funds abroad.VCBS That is why bank dollar prices in Vietnam usually move in the same direction as the Fed, only by a smaller margin. It does not guarantee local prices will always lag: if foreign currency supply weakens just as the global dollar climbs further, the cushion gets thinner.
The Fed's calendar this week, in Vietnam time
The schedule, compiled by Kiplinger: Mr. Warsh speaks at noon on Monday, Nov 16 US time, retail sales come out at 8:30 a.m. on Tuesday, Nov 17, and the minutes of the October meeting are released on Wednesday afternoon, Nov 18 US time, which is 2 a.m. on Nov 19 in Vietnam.Kiplinger
Mr. Warsh's remarks may not give much direct signal. According to CNBC, he has criticized the Fed for telegraphing its policy path too much, arguing that it ties the Fed's hands when decision time arrives, and has shortened the statement issued after each meeting.CNBC That makes the Nov 19 minutes the weightier document: they show how Fed members argued at a meeting where two wanted to hike immediately.
Scenario one: the Fed leans firmly toward tightening
The trigger is minutes showing that more members than the two dissenters were ready to hike sooner or by more, together with October retail sales that stay strong. The probability of a 50 basis point hike in December would then rise above the current 13% or so, and expectations of a further hike in January would firm up.
The transmission channel into Vietnam runs through interest rate differentials. If short-term US yields keep rising, holding dollar assets pays more and the dollar is supported. Domestically, that pressure combined with year-end foreign currency demand could push bank dollar prices up, at a pace that depends on foreign currency supply and on how the State Bank manages the market.
Who would be most affected:
- People who need to buy USD in the coming weeks (overseas tuition, medical care abroad, small traders importing goods): for USD 10,000, a selling rate of VND 25,910 comes to about VND 259.1 million. Each extra VND 100 on the selling rate adds VND 1 million to the same purchase.
- Companies and borrowers with unhedged USD debt: the debt converted into dong rises with the exchange rate. Each additional VND 100 on a USD 1 million loan means VND 100 million more to pay on conversion.
- Exporters earning USD: each dollar sold to a bank fetches more dong. Vietcombank's buying rate at the close of the week was VND 25,500.
Scenario two: expectations cool
The trigger is weak October retail sales, minutes showing that most members found the October pause reasonable, and Mr. Warsh saying nothing that makes the market think of a 50 basis point move. The Fed could still hike 25 basis points in December, but that is already priced in. What gets pulled back is the extra expectation on top, so the dollar loses some of its support.
Domestically, a small test already happened last week. On Nov 9, DXY fell to 101.65. On the morning of Nov 10, Vietcombank's selling rate dropped to VND 25,720, VND 150 below the morning of Nov 13. If expectations cool, bank dollar prices could ease in that direction. Even so, the State Bank's VND 25,500 purchase level and year-end demand for foreign currency could make it hard for prices to fall as deep as early in the month.
Who would be most affected:
- People who need to buy USD: they pay fewer dong for the same amount than in scenario one, though the saving is hundreds of thousands to a few million dong per USD 10,000, not tens of millions.
- Exporters: each dollar earned fetches fewer dong than in scenario one.
Signals to watch
Two indicators will show which scenario is playing out. The first is the probability of a 50 basis point hike on FedWatch after the 2 a.m. minutes on Nov 19: clearly above 13% means scenario one is gaining the upper hand. The second is Vietcombank's USD selling rate on the morning of Nov 19 against the VND 25,910 week-end close on Nov 13: a rise means the pressure has reached the counter, while a flat or lower print means domestic supply is still absorbing it.
This week the Fed will most likely not change direction, only degree. For a dollar buyer in Vietnam, that degree is measured in tens to hundreds of dong per dollar, and local prices have so far covered only about half the distance of the dollar index. VCBS expects the exchange rate to steady toward year-end as foreign currency supply improves. The Nov 19 minutes are the first data point to show whether that expectation holds while the global dollar is still strong.