Vietnam central bank to turn more dovish: Mitsubishi UFJ Financial Group
Vietnam can achieve greater exchange rate stability and its central bank would turn more “dovish” later this year, says Mitsubishi UFJ Financial Group (MUFG).

Logo of Mitsubishi UFJ Financial Group (MUFG). Photo courtesy of the company.
In a Monday commentary, MUFG, one of the biggest banking institutions in Japan, noted supporting factors for the USD/VND exchange rate and Vietnam’s economy.
External factors such as Fed rate cuts, a weaker USD and stronger Asian currencies, are expected to continue into 2025. Such a combination puts less pressure on the VND moving forward.
MUFG now expects the Fed Funds rate to fall below 3% by end-2025, a significant change relative to the 4.5% expectation at the start of April 2024.
MUFG also anticipates the U.S. will achieve a “soft” landing into 2025, leading to no “negative global spillovers” to Vietnam’s exporting activities and/or no “flight to safety” out of emerging market assets.
Another supporting factor is Vietnam’s strengths in exports and foreign direct investment attraction, which should continue into 2025 regardless of super typhoon Yagi’s negative impacts.
Vietnam’s export growth of 15% in August was supported by solid performance beyond just electronics, such as agriculture and textiles, MUFG said.
Domestic demand should continue its recovery with reasonably supportive government policies like boosting credit availability, cash flows, growth and the property market; VAT reduction; and higher minimum wages.
Those policies, along with gradual recovery in credit growth and spillover impact of better exporting activities, can further support the economy and the VND, MUFG noted.
Additionally, lowering U.S. rates should reduce domestic capital outflow pressure and narrow the yield spread with Vietnam, it highlighted. Domestic capital outflows are becoming less acute and should ease further, given better stability in the local gold market, lower U.S. rates, and manageable domestic inflation pressure, according to MUFG.

MUFG's macro forecast for Vietnam. Photo courtesy of MUFG.
As a result of those factors, MUFG anticipates the exchange rate in Vietnam should end 2024 at VND24,400 per U.S. dallar and VND24,600 by the end of 2025. The central bank will lower the three-month interbank rates to 3.75% by end-2024.
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