Exchange rate pressures still linger

The US Dollar plummeted

The DXY fell drastically during the month amid tariff turmoil. On April 2, Trump’s “Liberation Day” tariff announcement introduced sweeping duties on most imports from U.S. trade partners, including a hike in duties on Chinese goods to 145%. However, Trump also suspended reciprocal tariffs against major trade partners for 90 days. Additionally, the greenback faced downward pressure amid Trump’s criticisms of the Federal Reserve, where he appeared intent on ousting the Fed Chair. Collectively, these factors caused the DXY to drop by 10.2% from the beginning of 2025, hitting a three-year low of 98.3 on April 21.

Regarding economic data, U.S. manufacturing contracted for the second consecutive month, with the ISM PMI posting 48.7 in April as tariffs strained supply chains. Inflation eased before most new tariffs were implemented, with the PCE in March rising by 2.3% year-over-year, down from 2.7% in February.

Meanwhile, consumer spending accelerated at the fastest pace in over two years as households rushed to purchase goods ahead of the duties. Facing significant volatility and a bleak economic outlook with numerous risks, US consumer confidence plummeted to the second-lowest level on record, dating back to 1952. Consequently, the dollar depreciated by 4.8% over the month, reaching 99.2 by month-end, a 9.3% decline from the beginning of the year.

The exchange rate at high levels

Although the DXY fell sharply by 9.7% from its 2025 peak, the USD/VND interbank exchange rate remained elevated throughout April. In MBS’s opinion, despite eased external pressures, domestic demand exerted upward pressures on the exchange rate for the following reasons.

Firstly, in April, the State Treasury announced plans to purchase US dollars from commercial banks, with a maximum total value of USD 110mn, thereby tightening the USD supply.

Secondly, amid trade uncertainties related to unpredictable US tariff policies, businesses’ demand for foreign currency increased, contributing to the exchange rate’s rise. Furthermore, the sharp decline in interbank interest rates to a 13-month low by late April widened the negative VND-USD interest rate differential to its largest level this year, exacerbating exchange rate pressures. Hence, these factors significantly pressured the exchange rate.

As a result, the interbank exchange rate rose 1.4% in April to 25,994 VND/USD by the end of the month (2.1% compared to early 2025). Meanwhile, the free-market rate climbed to 26,470 VND/USD, while the central rate stood at 24,956 VND/USD, marking increases of 2.8% and 2.5%, respectively, from the start of the year.

MBS expects the exchange rate to fluctuate in the range of 25,500 – 26,000 VND/USD in 2025 as the new administration’s plans for fiscal easing, stricter immigration policies, high US interest rates compared to other economies, and increased protectionism are expected to drive a surge in the USD’s value. Additionally, unpredictable U.S. tariff policies are likely to pose challenges for Vietnam’s exports and FDI attraction in the near future, putting pressure on Vietnam’s already modest USD reserves, which were depleted by over USD 9bn last year. However, several factors have so far yielded positive results, supporting the VND such as: a positive trade surplus (US$3.1bn in 3M25), disbursed FDI (US$4.96bn, 7.2% yoy), and a rebound in international tourist arrivals (29.6% yoy in 3M25).