Vietnam’s Currency Hits Rock Bottom Against the Dollar
The Vietnamese dong has plummeted to a historic low against the US dollar, following the central bank’s decision to set a lower fixing rate. This marks a new milestone in the currency’s downward trajectory, which began in May.
Dollar Strength Weighs on Emerging Markets
The dollar’s surge in value, fueled by Donald Trump’s presidential victory, has put emerging-market currencies under intense pressure. Trade-reliant nations like Vietnam are particularly vulnerable, as they face uncertainty over potential US tariffs.
Federal Reserve’s Hawkish Stance Boosts Dollar
The Federal Reserve’s hawkish stance has further strengthened the dollar, causing the South Korean won to slide to its lowest level since 2009. This trend is expected to continue, with the dollar’s value likely to rise in the coming weeks.
Dong’s Downward Spiral
According to Tran Tuan Minh, CEO of TVI, a Hanoi-based equity research and investment firm, the dong’s decline is attributed to rising demand for the US dollar ahead of Trump’s inauguration next month. Minh predicts that the local currency may weaken further as companies require more dollars to settle year-end contracts.
Central Bank’s Intervention
The State Bank of Vietnam has reiterated its commitment to selling US dollars to stabilize the dong. However, the central bank’s daily reference rate for the currency has been set at a record-low of 24,327 dong per dollar, allowing the dong to trade within a 5% range of this rate.
Black Market Rates Soar
In the black market, the dong has fallen to as low as 25,850 per dollar, according to state radio Voice of Vietnam. This disparity between official and black market rates highlights the challenges facing the Vietnamese economy.
Expert Insights
Minh expects the US dollar to continue its upward trend, prompting the central bank to intervene with more dollar sales to calm the market. As the dong’s value continues to erode, the Vietnamese government faces mounting pressure to stabilize its currency and mitigate the impact of a strong dollar on its economy.
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