USD/VND: SBV to pare its FX reserve accumulation allowing the dong to appreciate – ANZ

The Vietnamese dong has appreciated 1.5% against the US dollar year-to-date, contrary to weakness among most other Asian currencies. In the view of economists at ANZ Bank, the dong will likely continue to appreciate amid reduced FX reserve accumulation by the SBV.

SBV’s FX reserve accumulation to slow

“The dong has appreciated despite Vietnam recording trade deficits in recent months. We attribute this to the July agreement between the State Bank of Vietnam and the US Treasury, which requires the former to refrain from competitive devaluation of the dong and allow greater exchange rate flexibility.”

“We expect that the SBV’s FX reserve accumulation to slow, which will likely lead to further appreciation in the dong, especially once Vietnam’s export sector has recovered from pandemic-led disruptions.” 

“We forecast USD/VND at 22,700 by year-end.”