USD/VND Outlook: Slightly weaker, but likely to move sideways as the rate is below its recent average and near recent lows.
Key drivers:
- Rate gap: The Federal Reserve's interest rate cuts have weakened the dollar's appeal compared to the Vietnamese Đồng.
- Risk/commodities: Oil prices have shown volatility, contributing to concerns about inflation, which may influence the VND's performance as Vietnam is an oil-importing country.
- One macro factor: The IMF's approval for a revaluation of the Vietnamese Đồng could support its value in the international market.
Range: The USD/VND is expected to drift within its recent 3-month range, as there are no strong signals suggesting a breakout in either direction.
What could change it:
- Upside risk: A significant increase in U.S. inflation, leading to a pullback in Fed rate cut expectations, could strengthen the USD.
- Downside risk: Stronger-than-forecast GDP growth in Vietnam could bolster the VND against the USD.