USD/VND remains under a lot of pressure in 2025

The USD/VND exchange rate may vary by /- 5% in 2025, even if the Donald Trump administration does not impose tariffs on Vietnam.

A lot of pressure

The VND has only lately begun to stabilize after suffering a severe depreciation against the USD in October and November of 2024. Although the VND has lost almost 4% of its value compared to the USD since the beginning of 2024, many analysts do not consider this devaluation to be alarming.

The USD/VND rate may become unstable by the end of this year and 2025 as a result of Donald Trump's victory, according to Dr. Pham The Anh, dean of the National Economics University Faculty of Economics.

According to the aforementioned analysis, Dr. Pham The Anh claimed that the USD quickly increased in value following Mr. Trump's announcement of a 60% tariff on items imported from China and a 20% tariff on goods imported from nations like Canada and Mexico. The rationale is that investors think that Trump's tariff approach will temporarily lower the US trade deficit, which will restrict the supply of USD on the foreign exchange market and raise the USD even more.

The FED may also have to be more cautious with its rate-cut trajectory and possibly raise rates again if inflation spikes while U.S. Treasury bond yields rise as a result of Donald Trump's fiscal support policies for the U.S. economy and tariffs on imports from trading partners. Each of these elements will support the USD's upward trend. A stronger USD will raise the short-term danger of the VND depreciating.

The FED's cut in rates will cause the USD to weaken in early 2025, according to Mr. Tim Leelahaphan, Standard Chartered Bank's economist for Thailand and Vietnam. However, when Donald Trump's second term's import tariff policies and expansionary fiscal measures are defined and put into effect, the USD is anticipated to gain significant strength in the second half of 2025.

Furthermore, Vietnam's exports may suffer from Donald Trump's tariff strategy, and foreign direct investment may move elsewhere to dodge the taxes. In the upcoming year, each of these elements will have a negative impact on the State Bank of Vietnam's (SBV) currency rate management.

Not too much worries

The SBV's capacity to "steer" the currency rate toward stability in 2025, however, continues to inspire optimism among many analysts.

According to Dr. Can Van Luc, a member of the National Financial and Monetary Policy Advisory Council, Vietnam's comparatively favorable supply-demand connection for foreign exchange may lead to a stabilization of the USD/VND exchange rate. Meanwhile, the enthusiasm that greeted Donald Trump's victory will fade for a while. As a result, there will be less speculative sentiment around foreign exchange. In particular, even though the rate decrease may slow down, the FED will keep cutting interest rates, which will help to lessen pressure on the USD/VND exchange rate in the near future by continuing to reduce the interest rate difference between the 2 currencies. 

Viet Dragon Securities Company (VDSC) experts thought that while the possibility of tariffs on Vietnam by the Trump administration in 2025 is real, it is not yet included in the baseline scenario.

Dr. Pham The Anh shares this view, arguing that despite Trump's initial "aggressive" approach, the tariffs will have a substantial effect on the interests of the United States and its allies. In the long run, tariffs cannot be imposed immediately; instead, discussions taking into account the interests of the United States and its allies are likely to be necessary.

Nonetheless, the USD/VND exchange rate will undoubtedly see pressure in 2025. Along with the strength of the USD, there is rising anxiety that global trade hostilities will continue to increase during Trump's second term in office. As a result, the SBV could need to monitor the pressure of depreciation on the VND.

In 2025, the VND would fall by 2.5% to 3%, according to Dr. Can Van Luc's estimate. Based on this year's high baseline of 25,300 VND/USD, Mr. Tran Hoang Son, Director of Market Strategy at VPBank Securities, also predicted that the VND would vary within a range of roughly 3%. Even if Vietnam is not hit by Trump's tariffs in 2025, the USD/VND exchange rate could still fluctuate by /- 5% the following year, according to VDSC experts.