Vietnam dong may depreciate 3% this year: Vietcombank Securities

The Vietnamese dong (VND) is forecast to weaken by circa 3% against the greenback this year in case the U.S. Dollar Index (DXY) does not rise further, said analysts at Vietcombank Securities Co.

The analysts expect the U.S. dollar to remain strong until the year-end until the U.S.’s Fed sends confirmative signals that it has been done with the tightening cycle.

Major central banks such as the Fed and ECB are likely to raise rates again later this year and keep rates at high levels longer than expected, they added.

The analysts noted that the VND devalued by another 1% in October, leading to a 4.4% loss against the USD in the first 10 months of this year. “The State Bank of Vietnam is still giving priority to its goal of cutting interest rates, hence causing permanent pressure on the USD/VND exchange rate.”

There have been no big differences between the USD prices offered by commercial banks and those on the unofficial market. In addition, the exchange rate is way below the ceiling set by the central bank (around VND25,200 per USD).

No disruptions and supply shortages have been observed in the market, said the brokerage house, a subsidiary of state-run Vietcombank – the largest forex trader in the country.

Furthermore, hard currency supply has been ample, it noted.

Vietnam reaped a trade surplus of more than $24 billion between January and October. Actual foreign direct investment (FDI) was $18 billion, up 2.4% year-on-year in the period, government data showed.

Inbound remittances have been resilient as Ho Chi Minh City received $6.7 billion from overseas Vietnamese in the first nine months this year, 1.3% higher than the figure recorded in the whole of 2022. HCMC historically accounts for around half of remittances in the country.

Meanwhile, analysts at BIDV Treasury of Hanoi-based lender BIDV recently forecast the VND to further devalue in the rest of November, moving in a range of VND24,250-25,450 a dollar.

If the U.S.’s consumer price index falls deeper than expected, causing the DXY to decline to below the 104 zone, and forex supply in Vietnam becomes stronger, the USD/VND rate may ease to around 24,000, BIDV Treasury added.

On the contrary, if U.S. inflation ticks up, the USD/VND rate may climb to the 24,500-24,600 territory.

The SBV raised its mid-point USD/VND rate by VND17 to VND24,002 a dollar on Thursday. Meanwhile, commercial banks raise their prices by VND10, with Vietcombank quoting the rate at VND24,170-24,200 for bids and asks.

The USD price has dropped around VND220 since the start of this month, resulting in a VND devaluation of 3.2% so far this year.