Hanoi (VNA) – Foreign exchange rates are likely torise strongly due to concerns that the US-China trade war may be escalating,said Director of the Vietnam Institute for Economic and Policy Research (VEPR) NguyenDuc Thanh.

The official said so while releasing a report on Vietnamesemacro-economy for the second quarter announced by the VEPR under the Universityof Economics, an affiliate of the Hanoi National University, on July 11, affirming that the US andChina are particularly significant trade partners to Vietnam.

While the US is the largest importer of Vietnamese goods,accounting for nearly one-fifth of Vietnam’s total export revenue, Vietnam alsoimports the most goods from China with roughly a quarter of the total import value.

Once the Chinese yuan loses value, Vietnam’s trade balancewith China will be affected as low-cost Chinese goods will flood into thecountry.

In the face of the US Federal Reserves (Fed)’ monetarytightening and Chinese yuan depreciation, Thanh suggested reducing the rate of theVietnamese dong to the US dollar, which should be lower than the reduction inrates between Chinese yuan and US dollar.

VEPR analysts pointed out that as a major importer ofChinese materials for processing and export, Vietnam could gain some advantagesto facilitate these exports.

The report said the Fed’s second interest rate hike in thesecond quarter of this year was one of the key factors pushing up US dollar pricesand depreciating the domestic currency, thus affecting the US dollar-Vietnamesedong exchange rate in the period under review.

The report went on to say that the foreign currency reserve(FCR) stands at 63.5 billion USD, equivalent to nearly 13 weeks of imports, andis the minimum national FCR recommended by the International Monetary Fund.

It suggested that Vietnam should accumulate more foreigncurrency reserves to stay confident in the global integration process. -VNA