Unpredictable Fluctuations
In early February, the global USD market experienced unusual movements. Specifically, on February 3, when U.S. President Donald Trump prepared to impose a 25% import tariff on Mexico and Canada, the U.S. Dollar Index (DXY) surged by 1.3% to 109.88.
Domestically, the USD/VND exchange rate also exhibited erratic movements during this period. On February 3, the first trading session after the Lunar New Year holiday, the State Bank of Vietnam (SBV) set the central exchange rate at 24,325 VND/USD, unchanged from the pre-holiday level. However, the interbank market closed at 25,300 VND/USD, marking a sharp increase of 200 VND from the previous level. On the same day, commercial banks also raised their exchange rates by 200-340 VND. Vietcombank listed the USD buying and selling prices at 25,110 - 25,500 VND/USD, while the free market remained stable at 25,450 - 25,550 VND/USD.
On February 4, despite a 0.5% decline in the DXY to 108.96, the SBV increased the central exchange rate by 35 VND to 24,360 VND/USD. However, bank exchange rates dropped sharply by about 100 VND, with Vietcombank adjusting its rates to 25,010 - 25,400 VND/USD. In contrast, the free market saw a notable increase of 170 VND in buying and 190 VND in selling, reaching 25,620 - 25,740 VND/USD. By February 6, the central exchange rate had surged to 24,425 VND/USD, prompting banks to adjust their rates upward. Vietcombank listed the USD exchange rate at 25,030 - 25,420 VND/USD, while the free market saw a slight decline to 25,610 - 25,710 VND/USD.
Compared to the beginning of the year, bank USD rates have decreased by about 80 VND, and free-market rates by approximately 90 VND. However, most forecasts suggest that the exchange rate will continue rising in 2025 due to the strengthening USD. Dragon Capital Securities Company predicts that the DXY index will increase by 5-10% in 2025, while the domestic exchange rate will fluctuate within a +/-5% range, potentially reaching 26,200 VND/USD by year-end.
Exchange Rate Expected to Rise Further
Experts anticipate that the USD will remain volatile but generally stronger in the first half of 2025. The policies implemented by President Trump during his second term will be a key factor influencing exchange rate movements. Additionally, the Vietnamese đồng (VND) remains susceptible to external factors, particularly the monetary policies of the U.S. Federal Reserve (Fed). Domestically, Vietnam’s diminishing foreign exchange reserves and inconsistent foreign currency inflows may further contribute to VND depreciation. As a result, 2025 is expected to be a challenging year for managing the country’s exchange rate.
According to Dr. Nguyễn Trí Hiếu, a financial expert, the Fed’s monetary policy—especially interest rate adjustments—will directly impact the USD’s value and Vietnam’s foreign exchange market. Currently, the USD is at a high valuation. If the USD weakens, the USD/VND exchange rate will face less pressure, likely increasing by only 3%. However, if the USD strengthens due to Trump’s monetary and foreign policies, the rising DXY index could push the exchange rate up by as much as 5-6%.
Exchange rate concerns have been prominent since March 2024. Over the course of 2024, the VND depreciated by 5.03% against the USD. The free market exchange rate rose to 25,800 VND/USD, while the central exchange rate reached 24,335 VND/USD, its highest level since the mechanism was introduced in 2016—an increase of 4.3% and 2%, respectively, compared to early 2024. In response, the SBV intervened by supplying substantial foreign currency liquidity to the market while adjusting the banking system’s liquidity to alleviate exchange rate pressures.
A 2025 strategy report by SHS Securities Company estimates that in 2024, Vietnam had to sell approximately USD 9.35 billion from foreign exchange reserves, straining the exogenous money supply in banks and making the system’s balance more precarious. Notably, 2022 and 2023 saw Fed interest rate hikes, whereas 2024 was more favorable due to three interest rate cuts totaling 1%. This reduced pressure on the USD/VND interest rate differential. However, Vietnam still had to sell USD, leading to continued currency devaluation.
Challenges in Exchange Rate Management
The Vietnamese foreign exchange market remains highly dollarized, making it vulnerable to significant psychological factors. Many organizations and businesses holding foreign currency hesitate to sell, while others continue to buy even when they do not have an immediate need. This behavior adds further complexity to exchange rate management. In 2025, multiple unpredictable factors could place additional pressure on the exchange rate and the foreign exchange market.
Dr. Nguyễn Hữu Huân from the University of Economics Ho Chi Minh City noted that the exchange rate will continue to be a hot topic in 2025, subject to unpredictable fluctuations driven by the ongoing U.S.-China trade conflict.
The key policy challenge in 2025 will be balancing interest rates and exchange rates. If the Vietnamese government prioritizes lower interest rates to stimulate economic growth, it will likely have to accept a weaker exchange rate. Conversely, if the government seeks exchange rate stability, it must maintain a more cautious interest rate policy. This trade-off will be central to Vietnam’s macroeconomic strategy in the coming year.
Moreover, the country’s long-term exchange rate stability will depend on structural economic reforms, improved trade balance, and enhanced foreign investment attraction. Addressing underlying issues such as dollarization, foreign currency hoarding, and regulatory inefficiencies will be crucial. As global economic uncertainties persist, Vietnam must adopt a proactive approach to ensure exchange rate stability while maintaining economic growth and financial resilience.
