Outlook for the USD/VND exchange rate in 2023

From the beginning of 2023 until now, Vietnam's official exchange rate has increased by 29 VND/USD.

>> Keeping the exchange rate stable to control inflation and lower interest rates

Vietnam's official currency rate increased by 29 dong per USD as of the beginning of 2023. It has decreased by 0.23% from its peak on November 2, 2022.

Three pressures

A number of factors will likely result in strong pressure on the USD/VND rate in 2023. First, the Fed is expected to keep hiking interest rates—at least twice more-and keep them high throughout 2023 without making any reductions.

Second, despite the fact that worldwide inflation has peaked, the cost of raw materials, fuel, and other necessities continues to be high. In Vietnam, elements like the plan for rising prices of necessities starting July 1, 2023, the delay in fiscal-monetary relaxation programs, and the increase in base pay, among others, put further pressure on inflation.

Finally, with major economies like the US and EU at risk of recession due to the global economic slowdown, Vietnam’s exports and FDI attractiveness would face considerable difficulties. The domestic supply of foreign currency will unavoidably be impacted by this.

Fluctuations of the USD/VND exchange rate

The reduction in foreign exchange reserves and issues with exports, according to BVSC, will keep the exchange rate under strict observation even though the Fed's rate increase has slowed and the pressure from the strong US dollar has subsided.

>> Failure to keep the exchange rate will cause difficulties for import and export

Stable VND as a priority

The majority of national and international organizations believe it will be challenging to buck this year's trend of VND devaluation. Due to the significance of keeping a stable currency rate to avoid inflation risks associated with macroeconomic stability, it is not anticipated to have a large impact.

The State Bank of Vietnam (SBV) will continue to place a high priority on controlling inflation, according to Mr. Tim Leelahaphan, the Standard Chartered Bank economist in charge of Thailand and Vietnam. Hence, provided that it does not adversely affect trade competitiveness, the SBV is expected to maintain a steady VND exchange rate.

Two exchange rate scenarios for 2023 have been generated by BSC based on these variables. The interbank exchange rate is anticipated to be 24,400 VND/USD (up 3.2%), if the Fed hikes rates over 5.25% along with Vietnam's inflation rate of 5.1% and a sluggish tourism recovery. The interbank rate will only rise to 23,900 VND/USD (up 1.1%), provided that the Fed keeps interest rates at their current level of 5.25%, Vietnam's inflation rate stays below 4.5%, and the tourism industry quickly recovers.