Vietnam central bank may up intervention with 4.5% VND devaluation forecast: broker
Vietnam’s central bank may have to ramp up intervention to safeguard the dong towards the year-end with the Vietnamese currency expected to devalue 4.5% this year, analysts say.

A teller counts dollars at an ABBank branch in Hanoi. Photo by The Investor/Trong Hieu.
Analysts with KB Securities Vietnam JSC (KBSV) note in a recent report that the USD/VND exchange rate has stayed high persistently since the start of this year, trading at around 25,450 currently – a 4.9% depreciation in the year to date, despite the State Bank of Vietnam (SBV) selling around $6 billion in foreign currency to local commercial banks as of June 26.
The exchange rate is likely to remain under great pressure in the coming months, driven by rising demand for input material imports; the tendency to deposit USD overseas by exporting and foreign-invested enterprises; and the stubbornly high U.S. Dollar Index (DXY), they say.
They reckon that upward pressure on the USD/VND rate is unlikely to ease until the middle of Q3/2024, when the U.S. Fed is predicted to make the first interest rate cut in years.

USD/VND exchange rate movement. Source: FiinPro, Bloomberg, KBSV.
To handle the pressure, the SBV is likely to continue selling hard currency. However, room for this maneuver is limited as the central bank’s forex reserves are decreasing and approaching the safety threshold of three months of import cover recommended by the International Monetary Fund.
Therefore, it is possible that the SBV continues raising VND-denominated interest rates via open market operations (OMO) and Treasury bills. Higher interest rates will help narrow the USD-VND interest gap, dampen forex speculation, and lead to high rates of VND-denominated deposits, the report says
In addition, the SBV may increase the price of greenback at which it sells to commercial banks, allowing the dong to depreciate more than 5% this year as the devaluation would still be milder than that of regional peers.
The USD/VND rate is expected to stabilize in Q4/2024 thanks to stronger exports, rising inbound remittances, and a much anticipated rate cut by the Fed, the report says.
“KBSV forecasts the USD/VND rate will stabilize and increase 4.5% for the whole of 2024, ending the year at 25,360.”
Similarly, Ho Chi Minh City-based Viet Dragon Securities (VDSC) has said it expects the SBV to continue facing USD/VND rate pressures.
Analysts with VDSC predict that the central bank will continue selling forex to protect the VND, but may not succeed in reigning in the dong depreciation to expected extent. Therefore, it may continue raising OMO interest rates to narrow the USD-VND rate gap on the interbank market.
If the SBV fails to keep the USD/VND exchange rate steady by tapping forex reserves, it may lift its policy rates by 25-50 basis points, VDSC analysts feel.
Meanwhile, Vietcombank Securities Co., a unit of state-run Vietcombank, said Wednesday that the VND depreciation may reduce to 3-4% against the greenback by the end of this year.
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