Exchange rate tension mounts amid dollar surge

The exchange rate has climbed back to near year-to-date highs, and while global risk-off sentiment may continue to weigh on the VND in the short term in line with regional trends, further downside appears limited.

- By Vy Vy

The USD has surged in recent weeks as escalating Middle East tensions and the closure of the Strait of Hormuz pushed crude prices sharply higher, driving safe-haven demand towards the greenback.

Pressure on the USD/VND exchange rate has intensified since early March as the USD rebounded strongly in global markets. On April 1, the State Bank of Vietnam (SBV) set the central reference rate at VND25,105 per USD, up VND3 from the previous session.

Amid mounting pressure, the SBV on March 24 had activated its foreign exchange intervention channel, offering cancellable forward USD sales with a 180-day tenor to credit institutions and foreign bank branches running short FX positions.

This facility is not applied system-wide but is selectively targeted at institutions with negative FX positions, with volumes calibrated to bring positions back to balance, indicating a measured and targeted supply of forward USD focused on the segment with the strongest interbank demand.

According to the March macroeconomic report released last week by MB Securities, the recent appreciation of the USD has been driven by renewed safe-haven demand following escalating US-Iran tensions, alongside expectations that the US Federal Reserve may delay interest rate cuts amid rising inflation risks linked to surging oil prices.