Vietnam dong hits historic low

The Vietnamese dong (VND) has reached a historic low against the U.S. dollar (USD) as the greenback continues strengthening on the international market.

On Wednesday, the State Bank of Vietnam (SBV), the country’s central bank, increased its reference USD/VND exchange rate by VND21 to VND24,288 a dollar, the highest since the rate debuted in early 2016.

With a ±5% trading band, commercial banks can quote the greenback at VND23,074-25,502.

The USD selling price hit the upper limit at state-controlled commercial banks such as Vietcombank – the largest forex trader in the country, BIDV, and Vietinbank, as well as private peers like Techcombank and Eximbank.

Meanwhile, gold shops in Hanoi lowered their quotes by VND70 on both sides to VND25,540-25,650 on Wednesday.

The USD price at commercial banks has been hovering near or at the permittable upper end over the past three weeks.

Since the start of this year, the USD has gained circa VND1,100, or 4.4%, versus the VND. In October and November, the dong has lost over 3% against the greenback.

On the interbank market, the USD/VND rate closed on Tuesday at 25,354, up VND26 from Monday. The rate has increased 4.5% in the year to date.

The U.S. Dollar Index (DXY), which measures the dollar’s strength against major currencies, was trading up 0.16% at 106.2 at the time of writing, the highest since late May, according to MarketWatch.

The greenback has rallied after Donald Trump won the November 5 presidential election and the Republicans took control of the Senate. According to observers, Trump’s potential higher tariffs may trigger inflation, limiting the U.S. Fed from cutting interest rates and adding strength to the dollar.

Besides the pressure from the international financial market, the USD/VND rate is also affected by rising forex demand due to seasonal factors. In addition, the forex demand from the State Treasury of Vietnam has also boldened the dong depreciation.

According to researchers with Ho Chi Minh City-based lender ACB, the USD/VND rate may cool in the second half of this week thanks to better forex supplies.

Answering questions from lawmakers on Monday, SBV Governor Nguyen Thi Hong attributed the USD/VND volatility to complex developments on the global currency market.

“Stabilizing the forex market and USD/VND rate is a challenge owing to market supply-demand,” Hong said, adding that expectations also drive the local forex market.

The governor asserted that her agency will continue to manage the USD/VND rate in line with market movements and may sell hard currency to keep the market steady and meet local demand when it deems necessary.