The Vietnamese dong, Vietnam’s local currency, is forecast to devalue around 3% against the U.S. dollar this year, a similar magnitude to that seen in 2023, as depreciation pressure lingers, Vietcombank Securities (VCBS) said.
Demand for forex in Vietnam strengthened last month as import-export activities gained momentum, sending the USD/VND rate at banks rising over 1% at certain moments, VCBS researchers said in its February macro report.
The VND lost 0.72% in value against the greenback in January, with the devaluation waning before the Lunar New Year holiday (Tet) as inbound remittances reached $16 billion in 2023, up 30% year-on-year.
VCBS, a unit of state-owned Vietcombank – the largest forex trader in Vietnam, said that downward pressure on the VND would persist as VND-denominated deposit interest rates had been on the fall, widening the gap with USD-denominated rates.
“USD/VND rate volatility will depend greatly on supply-demand of forex at certain moments, with determinants being foreign direct and indirect investment and remittances,” the brokerage firm noted.
Vietnamese experts have shared the view that the USD/VND rate is unlikely to experience high volatility this year given Vietnam’s macroeconomic stability and forex supplies. The rate will cool down after Tet.
KB Vietnam Securities has forecast the USD/VND rate to increase 1.5% to around VND24,600 a dollar this year, buoyed by an overall payment balance surplus of $7-10 billion.
Similarly, analysts at VNDIRECT Securities expect the VND to weaken 1-2% against the USD this year.