The exchange rate is expected to gradually decrease towards the end of the year.

The health of the USD is weakening.

Many investors are more optimistic about the Fed cutting interest rates after US economic data showed that the Consumer Price Index (CPI) for May 2025 was lower than expected. Specifically, the US CPI rose 0.1% in May, lower than the 0.2% forecast by economists surveyed by Dow Jones. Therefore, investors are predicting an 80% probability that the Fed will cut interest rates in September 2025, with a second rate cut as early as October.

On the global market, the US dollar fell sharply due to expectations of a Fed interest rate cut, geopolitical tensions, lower-than-expected US inflation data, and developments in US-China trade negotiations. The USD-Index dropped to 97.86 points at the end of the week – a decrease of more than 9% compared to the beginning of the year. This weakness mainly stems from concerns about economic growth and trade policies from the US.

Mr. Dinh Duc Quang, Director of Currency Trading at UOB Vietnam, believes that with the prospect of declining USD interest rates, coupled with short-term difficulties due to the impact of tariff fluctuations on economic prospects and attracting investment capital into US assets, UOB forecasts that the USD-Index may face pressure to fall below 100 in the remaining months of 2025 and could be around 97 at the beginning of 2026.

Associate Professor Dr. Nguyen Huu Huan, Senior Lecturer at the University of Economics Ho Chi Minh City, stated that the decrease in the USD-Index has helped reduce pressure on the VND/USD exchange rate. However, the exchange rate is still maintaining a high level, indicating that this pressure remains present. Furthermore, the exchange rate tends to be seasonal; it may decrease currently, but is expected to start rising again around August 2025.

The impact on exchange rates gradually decreased towards the end of the year.

The central VND/USD exchange rate listed by the State Bank of Vietnam (SBV) on June 13th decreased by 15 VND, to 24,975 VND/USD. Commercial banks kept their USD prices unchanged, with Vietcombank buying at 25,820 - 25,850 VND/USD and selling at 26,210 VND/USD.

In a report published on June 9, 2025, UOB stated that the VND had depreciated by 1.8% since the beginning of the quarter, reaching a new record low of 26,000 VND/USD. This weakening mainly stems from a less positive economic outlook and increased risk of the US reimposing the 46% tariff if negotiations do not make significant progress.

These factors are expected to continue putting pressure on the VND in the short term. UOB believes that the VND will remain in a weak trading range against the USD until the end of Q3 2025. However, from Q4 2025 onwards, the VND may begin to regain its recovery momentum, aligning with the general improvement trend of Asian currencies as trade uncertainties gradually ease.

According to UOB economists, inflation in Vietnam has somewhat cooled down, at around 3.1% year-on-year in March and April 2025, down from the average of 3.6% in 2024 and 3.26% in 2023, and below the target of 4.5%. The mild inflation environment, coupled with rising global trade tensions and tariff uncertainties, opens up the possibility of the State Bank of Vietnam easing monetary policy.

However, unlike some countries in the region, the weakening exchange rate is a factor that the State Bank of Vietnam (SBV) has to consider. UOB forecasts that the SBV will keep policy interest rates unchanged, with the refinancing rate remaining at 4.50%.

If domestic business conditions and the labor market weaken significantly, UOB expects the State Bank of Vietnam to potentially lower the one-time refinancing rate to the Covid-19 low of 4%, and then further reduce it by 50 basis points to 3.50%, provided the foreign exchange market remains stable and the Fed cuts interest rates.

According to UOB analysts, the VND will continue to fluctuate in a weak range against the USD until the end of Q3 2025. However, from Q4 2025 onwards, the VND may begin to regain its momentum, aligning with the general improvement trend of Asian currencies as trade uncertainties gradually ease. UOB updates its VND/USD exchange rate forecast at 26,300 VND/USD in Q3 2025, 26,100 VND/USD in Q4 2025, 25,900 VND/USD in Q1 2026, and 25,700 VND/USD in Q2 2026.

Mr. Pyon Young Hwan, Director of Foreign Exchange and Derivatives Trading at Shinhan Bank Vietnam, believes that if the Fed cuts interest rates, it will provide emerging markets like Vietnam with more room to ease monetary policy. A Fed interest rate cut could help stabilize the VND/USD exchange rate, creating favorable conditions for the State Bank of Vietnam to implement monetary policy easing measures more flexibly.

However, Vietnam may still need to maintain higher interest rates than the US for a certain period. According to Shinhan Bank experts, in the short term, the trend of the VND/USD exchange rate depends on the outcome of the first round of tariff negotiations between the US and Vietnam. Shinhan Vietnam forecasts that by the end of Q3/2025, the exchange rate will fluctuate around 25,600 - 26,000 VND/USD.

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