VND defies pressures of trade deficit

Pressures on the foreign exchange market are remaining largely contained, reflecting the resilience of external funding sources and effective policy management.

- By Ha Truc

The USD/VND exchange rate has climbed steadily since early June, with the State Bank of Vietnam raising the central reference rate from VND25,138 per USD at the start of the month to VND25,195 per USD on June 26. However, the VND has remained broadly stable in recent weeks, trading within a narrow range against the USD during April and May.

A market report published on June 12 by the Global Market and Economic Research Department of UOB Bank Singapore stated that the recent stability of the exchange rate stems from April intervention, via 180-day cancellable forwards at VND26,850/USD, appears to have set an effective ceiling, anchoring expectations and curbing speculation. The extension of the US-Iran ceasefire in late May has also supported the external backdrop.

“The VND may remain under pressure in the third quarter amid geopolitical uncertainty, but UOB maintains a broadly stable medium-term outlook, supported by strong growth, sustained foreign direct investment (FDI) inflows and a steady monetary policy stance,” UOB said.

“We retain a gradual depreciation bias for USD/VND, with updated forecasts of 26,500 in Q3, 26,400 in Q4, and 26,300 in Q1 of 2027.”

Exchange rates typically react quickly to shocks in trade flows, capital movements and interest rate differentials. However, the recent performance of the VND suggests a different picture.