The US Federal Reserve decided to keep its benchmark interest rate unchanged but indicated that rate cuts could be implemented later this year.

The SBV has raised the daily fixing and upper forex ceiling rate, photo Le Toan

State Bank of Vietnam (SBV) Deputy Governor Dao Minh Tu reaffirmed that with foreign exchange reserves, a positive export outlook, foreign investment inflows, and remittances, he remains confident in maintaining exchange rate stability.

“There is no need for individuals to hold foreign currency at home or in accounts. Sell it to the banks with confidence,” said Tu.

Taking a more cautious stance, UOB Singapore, noted that the VND hit a record low of around 25,600 VND/USD in early March after the SBV raised its USD selling price for banks, marking its first adjustment since October last year.

“The trend still leans towards further VND depreciation due to uncertainties related to China’s growth and tariff policies. There is a risk that the United States will impose tariffs on Vietnamese goods as Vietnam’s trade surplus with the US continues to rise significantly. However, strong domestic growth prospects and the SBV’s commitment to exchange rate stability could help ease depreciation pressure,” the UOB research team said.

In its Foreign Exchange Outlook report released last week, MUFG Bank raised its Q4 USD/VND projection to 25,900 from 25,700, reflecting the government’s focus on supporting growth and a higher tolerance for inflation at 5 per cent in 2025.

“The SBV has also raised the daily fixing and upper foreign exchange ceiling rate, allowing greater foreign exchange volatility. This coincides with major changes in Vietnam’s government policy, which could cut and streamline anywhere from 4-20 per cent of public sector employees, while authorities plan around 1.5 per cent of GDP in social support measures to aid the transition.”

Regarding the full-year exchange rate outlook, MUFG Bank forecasts USD/VND to approach 26,000 in 2025, charting a modest path while acknowledging other offsetting structural factors.

“While we continue to expect Vietnam to be in the crosshairs of the new US administration due to its large and growing trade surplus with the US, we highlight several reasons for optimism,” stated the report.

“Firstly, Vietnam has expanded its global export market share, not just in the US but worldwide, since the trade war began. Secondly, the country is moving up the value chain, increasing domestic value-added and export complexity. Lastly, we anticipate the US tariffs on China to remain higher and rise at a faster pace than those on Vietnam under the US administration.”

According to the National Statistics Office, Vietnam recorded its first trade deficit since May 2024 in February, with imports surging by 40 per cent year-over-year. Meanwhile, the State Treasury conducted three rounds of USD purchases from commercial banks, totalling $500 million, further tightening foreign exchange liquidity and adding pressure on the exchange rate.

“In this context, SBV has intervened by continuously raising the central exchange rate, widening the foreign exchange trading band,” said Tran Thi Khanh Hien, head of Research at MB Securities. “Since the start of this month, the central rate has increased by over VND400, equivalent to a 1.6 per cent adjustment, substantial compared to the VND487 rise for the whole of 2024. Additionally, the SBV has abandoned its previous hard cap of 25,450 VND/USD in the interbank market. This move signals that the SBV is accepting greater exchange rate volatility to reduce pressure on foreign exchange reserves.”