Vietnam dong likely to narrow slide by end-2024: Vietcombank Securities
Vietnamese currency dong (VND) is likely to appreciate against the U.S. dollar towards the year-end, narrowing its year-to-date depreciation, analysts with Vietcombank Securities say.
They base their forecast on the anticipation that the U.S. Federal Reserve will start cutting rates.
So far this year, the dong has slid 4.95% against the greenback, but this is mild compared to several regional peers, says a report by Hanoi-based Vietcombank Securities (VCBS).

The VND's depreciation in comparison to other regional currencies. Chart by Vietcombank Securities and CEIC.
In case the U.S. Dollar Index (DXY) stops going up or even wanes in H2/2024, and the State Bank of Vietnam manages the monetary policy flexibly, the VND is expected to depreciate at a “reasonable” 3% against the USD, reckons VCBS, a unit of leading forex trader Vietcombank.
Although VCBS analysts recognize constant downward pressure on the VND, they argue that such pressure has been factored in the dong’s slide. “In case there are no more global surprise events, or the DXY does not rise strongly, the VND’s depreciation will end in Q2 and Q3.”
They expect the State Bank of Vietnam (SBV), the country’s central bank, to manage monetary tools gradually and flexibly to ensure macroeconomic stability and help the country retain its status as an attractive and safe investment destination.
A stable dong will not only help buoy foreign investor confidence, but also guarantee Vietnam’s debt servicing, the VCBS report says.
As of end-2023, Vietnam’s foreign borrowings, including foreign loans taken by the government and companies, were estimated at $145 billion, or 37-38% of GDP.

A USD transaction at a bank in Vietnam. Photo courtesy of Thoi Bao Tai Chinh (Financial Times).
To meet macro goals, the central bank is expected to utilize more interest rate tools, with priority given to open market operations (OMOs). The first signal was seen on April 23 when the OMO rate increased from 4% to 4.25%.
With the SBV’s intervention, deposit interest rates are likely to rise gradually, helping narrow the disparity between USD- and VND-denominated rates, which has been a major cause of the dong’s recent slide.
Interest rates are likely to increase moderately, by 50-100 basis points, as there is no high demand for credit at the moment, VCBS analysts say.
Meanwhile, SBV officials have affirmed that the banking regulator would intervene, including through the sale of foreign currencies, to rein in the overdone weakening of the dong.
The SBV is estimated to have sold foreign currency worth $500-700 million via spot transactions in recent weeks, according to analysts with data provider WiGroup.
VCBS’s VND projection coincides with Singaporean banking major UOB. Earlier this month, UOB analysts forecast that the VND would appreciate against the greenback in H2/2024, with the Fed likely to cut interest rates twice this year, in September and December.
With receding Fed rate cut expectations, the USD/VND rate is likely to stay elevated for a while longer. “Beyond near-term external headwinds, we expect the VND to draw support from resilient fundamentals and a subsequent recovery in the CNY. Our updated USD/VND forecasts are 25,600 in Q2/2024, 25,100 in Q3, 24,800 in Q4 and 24,600 in Q1/2025,” the UOB analysts predicted.
Despite the dong’s depreciation, registered foreign direct investment (FDI) in Vietnam reached $9.27 billion $9.27 billion in the year to April 22, up 4.5% year-on-year. Disbursed FDI hit $6.28 billion, the highest figure in the last five years, up 7.4%, according to government data.
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