USD/VND Outlook:
The USD/VND exchange rate is slightly positive but likely to move sideways, as it is just below its recent average and trading within a stable range. Recent geopolitical tensions boosting safe-haven demand for the USD are keeping it elevated.
Key drivers:
• Rate gap: The U.S. Federal Reserve's recent interest rate cuts could weaken the USD against the VND as lower rates generally lead to less demand for the dollar.
• Risk/commodities: With heightened geopolitical events, such as potential military actions involving the U.S., safe-haven demand is rising for the USD, impacting its strength against the VND.
• One macro factor: Vietnam’s tight liquidity conditions, driven by a surge in interbank overnight rates, are contributing to the pressures on the VND in the current environment.
Range:
The USD/VND is likely to drift within its recent range, reflecting modest fluctuations with no clear directional trend.
What could change it:
• Upside risk: A significant surge in U.S. job market resilience or geopolitical tensions could lead to a stronger USD.
• Downside risk: An unexpected aggressive interest rate reduction by the Fed could weaken the USD further against the VND.
