Below are some key impacts on many economic indicators & interest rates, exchange rates, and inflation in

Vietnam, let's analyze and discuss it a bit

1. Interest rates

• Increased pressure on domestic interest rates: When US bond yields rise, international investors

the economy will tend to shift capital to higher-yielding assets in the US, putting pressure on

capital outflows from emerging markets, including Vietnam. To keep capital in

or attract additional capital flows, Vietnam may have to raise domestic interest rates.

• The ability to continue tightening monetary policy: The State Bank of Vietnam may face pressure to maintain or raise interest rates to control the exchange rate and protect foreign exchange reserves.

This may increase borrowing costs in the economy, affecting activity

investment and consumption activity.

2. Exchange rates

• Pressure on the VND/USD exchange rate: When US bond yields rise, USD tends to

strengthening due to capital inflows to the US. This may put pressure on the exchange rate of

VND, causing VND to depreciate against USD.

• Increased foreign currency debt burden: When VND depreciates, businesses and the Government have

debts in USD will have to be repaid more in local currency. This increases pressure

financial costs and may reduce corporate profits, thereby affecting domestic economic activity.

3. Inflation

• Increased import prices: With VND depreciating, prices of imported products such as raw

materials, consumer goods, and fuel will rise, leading to imported inflationary pressure.

Rising production and domestic consumption costs may push inflation higher.

• The potential to reduce inflationary pressure due to reduced demand: However, if high interest rates cause

consumption and investment decline, pressure on inflation from the demand side may ease somewhat

any.

Summary

The rise in US bond yields significantly affects Vietnam, especially

in the context of Vietnam striving to control inflation and stabilize the macro economy. Vietnam may need to continue managing these moves, which may also slow down economic growth.

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