High USD Exchange Rate and Rising Interest Rates: What Signals for the Economy?

Exchange Rate Pressure in Complex Context

From the perspective of a trader who has monitored currency markets for years, I see domestic USD anchored high around 26,914 VND/USD alongside 3-month bank deposit rates rising to 4.55% per annum as noteworthy signals about current macroeconomic conditions.

Looking back at my journey from losing $1000 in forex, I learned that exchange rates don't just reflect simple supply and demand but are mirrors reflecting confidence in the economy. Al Brooks once taught me about the importance of reading implicit signals from market data, and currently we're seeing mixed signals.

Analyzing Drivers Behind High Exchange Rate

USD maintaining at the high level of 26,914 VND could stem from multiple factors. Bob Volman once emphasized that when analyzing currency markets, we need to consider both domestic and international factors. Pressure from strong USD in international markets, import demand, and investment psychology may all contribute to maintaining this exchange rate level.

Luna, my ragdoll cat, is usually very sensitive to changes in surrounding environment. Similarly, Vietnam's foreign exchange market is also reflecting changes in both domestic and international economic contexts.

Bank Interest Rates - Policy Tool or Passive Response?

In TramNgo FX-Crypto Community, I often share about the relationship between interest rates and exchange rates. The 3-month term rate rising to 4.55% per annum can be understood in two ways: this could be banks' efforts to attract deposits and limit money flow to foreign currency, or simply reflect increased funding costs.

Interestingly, short-term interbank rates (one week and two weeks) dropped sharply. This differentiation shows imbalances in short-term versus long-term liquidity in the banking system.

Implications for Businesses and Consumers