Vietnam faces significant uncertainties over exchange rates and monetary policy in the coming months, Pham Chi Quang, director of the State Bank of Vietnam’s monetary policy department, told a press conference Tuesday, The Investor has reported→view source.
Key details:
- Low interest rate policy: Quang explained that the government’s directive to keep VND interest rates low to support GDP growth has created a negative VND-USD interest rate gap, contributing to VND depreciation despite a weaker USD globally.
- VND performance: He noted that while the USD index (DXY) fell about 10 percent in H1 2025, the VND still depreciated 2.7–2.8 percent during the same period.
- Foreign capital outflows: Quang emphasised that despite a trade surplus and positive balance of payments, foreign investors have been net sellers in Vietnam’s stock market since 2024, putting downward pressure on the exchange rate.
- External policy risks: He warned that the newly announced US reciprocal tariff schedule on 14 countries could disrupt global FDI flows, drive capital into the USD as a safe haven, and increase exchange rate volatility in Vietnam.
- Fed policy impact: Quang highlighted that the US Federal Reserve has delayed interest rate cuts twice, maintaining USD strength and encouraging capital outflows from emerging markets, including Vietnam.
- Additional sensitivities: He stressed that Vietnam’s highly open economy makes it particularly vulnerable to policy changes in major export markets, especially from the US.
Quang’s comments underscore the policy trade-off Vietnam faces between maintaining low interest rates to support economic growth and stabilising the exchange rate.
Continued foreign capital outflows, combined with external shocks from US tariffs and a strong USD, pose growing challenges for the SBV in balancing growth objectives and financial stability.
See also: How Low Can the Vietnamese Dong Go? Why it’s Sliding & What Might Happen Next