USD health weakens
Investors are increasingly expecting the Fed to cut interest rates after US economic data showed that the Consumer Price Index (CPI) in May 2025 was lower than expected. Accordingly, the US CPI increased by 0.1% in May, lower than the 0.2% forecast by economists surveyed by Dow Jones. Therefore, investors predict an 80% probability that the Fed will cut interest rates in September 2025, with the second rate cut coming in October at the earliest.
In the world market, the greenback fell sharply due to the impact of expectations of the Fed cutting interest rates, geopolitical tensions, lower-than-expected US inflation data, as well as developments in US-China trade negotiations. The USD-Index fell to 97.86 points in the last session of the week - down more than 9% compared to the beginning of the year. This weakness mainly came from concerns about economic growth and trade policy from the US.
Mr. Dinh Duc Quang, Director of Currency Trading Division, UOB Vietnam Bank, said that with the prospect of USD interest rates trending downward, along with short-term difficulties due to the impact of tariff fluctuations on economic prospects and attracting investment flows into assets in the US, UOB forecasts that the USD-Index may be under pressure to fall below the 100 mark in the remaining months of 2025 and may be around 97 in early 2026.
Associate Professor, Dr. Nguyen Huu Huan, Senior Lecturer at Ho Chi Minh City University of Economics, said that the decrease in the USD-Index has helped reduce pressure on the VND/USD exchange rate. However, the exchange rate is still maintained at a high level, showing that this pressure still exists. In addition, the exchange rate tends to be seasonal, it may decrease at present, but is expected to start increasing again around August 2025.
Impact on exchange rate gradually decreases at the end of the year
The central VND/USD exchange rate listed by the State Bank of Vietnam (SBV) on June 13 decreased by VND15, down to VND24,975/USD. Commercial banks kept the USD price unchanged, Vietcombank bought at VND25,820 - 25,850/USD, and sold at VND26,210/USD.
In a report published on June 9, 2025, UOB said that since the beginning of the quarter, the VND has depreciated by 1.8%, reaching a new record low of VND26,000/USD. This weakness mainly stems from the less positive economic outlook and the increased risk of the US re-imposing a 46% tariff if negotiations do not make significant progress.
The above factors are expected to continue to put pressure on VND in the short term. UOB believes that VND will continue to fluctuate in a weak range within the trading range with USD until the end of Q3/2025. However, from Q4/2025 onwards, VND may begin to regain momentum, in line with the general improving trend of Asian currencies as trade uncertainties gradually ease.
According to UOB economists, inflation in Vietnam has cooled somewhat, at around 3.1% yoy in March and April 2025, down from an average of 3.6% in 2024 and 3.26% in 2023, and below the target of 4.5%. The benign inflation backdrop, amid global trade tensions and rising tariff uncertainties, opens up the possibility of the SBV easing monetary policy.
However, unlike some countries in the region, the weakening of the exchange rate is a factor that the SBV has to consider. UOB forecasts that the SBV will keep its policy interest rate unchanged, with the refinancing rate maintained at 4.50%.
If domestic business conditions and the labor market weaken significantly, UOB expects the SBV could cut the refinancing rate once to a Covid-19 low of 4%, followed by a further 50 basis points reduction to 3.50%, provided the foreign exchange market remains stable and the Fed cuts rates.
According to UOB analysts, VND will continue to fluctuate in a weak range within the trading range with USD until the end of Q3/2025. However, from Q4/2025 onwards, VND may begin to regain its recovery momentum, in line with the general improvement trend of Asian currencies as trade uncertainties gradually ease. UOB updated its forecast for VND/USD exchange rate at VND26,300/USD in Q3/2025, VND26,100/USD in Q4/2025, VND25,900/USD in Q1/2026, and VND25,700/USD in Q2/2026.
Mr. Pyon Young Hwan, Director of Foreign Exchange and Derivatives, Shinhan Bank Vietnam, said that if the Fed cuts interest rates, it will be an opportunity for emerging markets like Vietnam to have more room to loosen monetary policy. The Fed's interest rate cut can help stabilize the VND/USD exchange rate, creating favorable conditions for the State Bank 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 of time. According to Shinhan Bank experts, in the short term, the trend of the VND/USD exchange rate depends on the results of the first round of tariff negotiations between the US and Vietnam. Shinhan Vietnam forecasts that by the end of the third quarter of 2025, the exchange rate will fluctuate around 25,600 - 26,000 VND/USD.
Source: https://baodautu.vn/ty-gia-duoc-ky-vong-giam-dan-ve-cuoi-nam-d304298.html
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