Interest rates continue to be a concern both in domestic and foreign markets

(TBTCO) – Interest rates remained a concern in both domestic and foreign financial markets last week. Domestically, the move to reduce interest rates has shown signs of gradually warming real estate. Meanwhile in the international market, the FED’s last meeting of the year concluded that interest rates had peaked, opening up expectations of a transition to a reduction cycle from 2024.

Interest rates support liquidity for real estate

The recent signs of a thaw in the real estate market are considered by investors to be positive signs thanks to the recent trend of decreasing interest rates.

Some recent sales launches show that about 80% of the apartments of Khang Dien House (KDH) opened for sale at the mid-range segment project “Privia” were purchased right at the sale event. In addition, 80% of the apartments of the Glory Heights project of Vinhomes (VHM) were sold and 80% of the Akari project of Nam Long (NLG) were also sold quickly.

Assessing these moves, Mr. Michael Kokalari – Director of Macroeconomic Analysis and Market Research Department of VinaCapital said that there has been a slight increase in credit levels for real estate investors recently. will help them enhance development activities. Vietnam’s latest credit growth figures show that demand for home loans is still weak, but this could change as mortgage interest rates have fallen in recent months.

Interest rates continue to be a concern both in domestic and foreign markets
USD is tending to weaken. Photo: TL

According to VinaCapital’s survey, mortgage interest rates peaked at up to 16% at some banks in early 2023, but then decreased significantly. Mortgage interest rates are currently similar to the level before the Government’s sharp increase in interest rates last year. However, investor sentiment and market transactions will not fully recover until mid-2024.

Interest rate expectations in the US changed direction

The recent decision of the US Federal Reserve (FED) after the December 2023 meeting to keep interest rates unchanged was not too surprising to the market. However, this is considered an important message showing that the series of interest rate increases lasting the past 2 years has ended.

Accordingly, if the financial market does not have any unexpected events, the FED’s interest rate reduction cycle will likely take place from around mid-2024. Based on developments in the meeting and the press conference speech of the Fed. FED Chairman Jerome Powell, the market expects that the FED will reduce operating interest rates by 1.5 percentage points next year.

US inflation cooled down, causing the FED to stop raising interest rates

Cooling down inflation in the US is an important factor that allows the FOMC (FED’s policymaking agency) to keep the operating interest rate unchanged at the range of 5.25 – 5.5% in the last policy meeting of the year. Officials also forecast three interest rate cuts next year. This number is lower than what the market expected, but higher than the previous statement of the US central bank.

Regarding the impact of the financial market if the interest rate reduction cycle occurs, the first asset group that may be affected is stocks. Specifically, if interest rates decrease next year, stock prices may increase due to costs. Opportunities for holding stocks will decrease.

Regarding the impact on the exchange rate, if the USD interest rate decreases, holding this currency will be less profitable and this can lead to a tendency for other currencies to increase compared to the USD, especially in the US. Asia. The Japanese Yen surpassed its highest level since August and continues to rise, and the Korean Won and Malaysian Ringget are also on an upward trend.

Exchange rates fell sharply at the weekend

Central exchange rates and at commercial banks increased slightly during weekdays, but then adjusted to decrease sharply on Friday of the weekend.

The central exchange rate announced by the State Bank on Monday morning at the beginning of the week was 23,932 VND/USD, then increased to 23,954 VND/USD on Wednesday. However, the State Bank of Vietnam sharply reduced the central exchange rate on Friday to only 23,882 VND/USD, thereby reducing the central exchange rate at the weekend by 50 VND per USD compared to Monday.

Meanwhile, the USD exchange rate announced by Vietcombank also had similar developments, opening the new week with the listed selling price at this bank being 24,400 VND/USD, after a number of increasing sessions, it turned down again today. Friday it dropped to only 24,390 VND/USD.

International monetary market developments show that the DXY index measuring the strength of the USD continues to weaken, falling to just over 102 points. This development is due to forecasts of falling interest rates in the US in 2024, which could reduce the value of the USD compared to other currencies.

Interest rates continue to be a concern both in domestic and foreign markets
USD depreciation makes gold more expensive compared to this currency. Photo: TL

Gold prices decreased in the middle of the week but increased at the end of the week

Gold prices decreased at some points in the middle of the week, however, this precious metal turned to increase strongly again at the end of the week.

Opening the week on Monday, December 11, SJC 9999 gold price was recorded at 72.8 million VND/tael purchased and 73.82 million VND/tael sold. After that, this precious metal adjusted down to only 72.5 million VND/tael purchased and 73.52 million VND/tael sold.

However, the gold atmosphere heated up again at the weekend and accordingly, the price of SJC 9999 gold on Friday last week increased to 73.3 million VND/tael purchased and 74.32 million VND/tael. sold out. The price level on the weekend accordingly increased by more than 500 thousand VND per tael compared to the beginning of the week.

Domestic gold price movements were quite in sync with world gold prices last week. On Monday, the world gold price traded at 2,003.1 USD/oz, then sometimes dropped to about 1,987 USD/ounce. However, the gold price then rebounded to 2,035.8 USD/ounce.

New expectations about interest rates are still considered a factor affecting gold prices, because when interest rates decrease, investors will be able to look to hold more gold. Furthermore, falling USD prices also make gold more valuable when compared to this currency because gold is often quoted in USD.

The timing of the FED’s interest rate cut is still uncertain

Even before this month’s policy meeting, most investors believed that the FED had completed its interest rate hike cycle. This agency raised interest rates a total of 11 times since last year, bringing operating interest rates to the highest level in more than 22 years. However, investors still do not know exactly which month the FED will loosen monetary policy next year.

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