Commerzbank’s Asia FX team reports a constructive near-term outlook for the Vietnamese Dong (VND), citing strong Foreign Direct Investment (FDI) inflows and robust economic growth as key supportive factors [1]. The USD/VND exchange rate remained steady around 25,994, which is below its July peak of 26,340, resulting in the VND being approximately 1.2% stronger against the USD year-to-date [1].
September's Consumer Price Index (CPI) rose 5.1% year-on-year, compared to 4.9% in August, aligning with market expectations and pushing average inflation for January–September to 4.52%, slightly above the government’s 4.5% target [1]. The report notes that the recent acceleration in headline CPI is mainly supply-driven, but with capital formation expanding above 20%, strong consumption growth, and emerging capacity constraints, demand-side inflation risks are becoming more significant [1]. Elevated oil prices, a widening trade deficit, and high US yields are also cited as factors limiting further appreciation of the VND [1].
Commerzbank suggests that the State Bank of Vietnam (SBV) is likely to prioritize balancing growth support with inflation control, banking-system liquidity, and exchange-rate stability, given the inflationary pressures and rapid credit expansion [1]. The combination of these factors reduces the SBV’s ability to provide additional monetary support, despite the government’s aggressive growth objectives [1].
Overall, while the VND is supported by strong FDI and economic growth, its upside remains constrained by inflation, trade deficits, and external financial conditions [1].
CONCLUSION
The Vietnamese Dong has shown moderate strength this year, supported by robust FDI and economic growth. However, inflation above target, a widening trade deficit, and elevated oil prices are expected to limit further appreciation. The SBV is likely to maintain a cautious stance, balancing growth and inflation, which suggests only limited upside for the VND in the near term.