The US dollar is expected to strengthen in H2 2025 as fiscal and tariff measures under the next US administration are clarified and implemented, the bank said in its latest macroeconomic update for Vietnam.
Standard Chartered expects strong GDP growth of 6.7 per cent next year in Vietnam, with growth easing from 7.5 per cent YoY in the first half (H1) of 2025 to 6.1 per cent in H2.
Persistent inflation and structural factors, such as productivity, will influence foreign exchange market dynamics, with rate differentials remaining a key driver.
The US dollar is expected to strengthen in H2 2025.
The lingering effects of rapid rate hikes and US dollar strength since October 2024 may further pressure the currency, it said.
Persistent inflation and structural factors, such as productivity, will influence foreign exchange market dynamics, with rate differentials remaining a key driver.
In the long term, the sustainability of macro-stimulus measures will influence US dollar strength. Foreign and domestic investors might prefer inflation-protected assets if inflation uncertainty persists, the bank noted.
Recent Fed rate cuts were expected to support Asian currencies, including the Vietnamese dong. However, stronger-than-anticipated US economic data has led to a less supportive environment for Asian foreign exchange markets.
Trade policy uncertainties and inflation-inducing measures under the next US administration could further complicate currency stability in the region, the bank observed.
“We expect the State Bank of Vietnam (SBV) to hike rates by 50 bps in Q2 [second quarter] 2025. The government’s desire for stronger economic growth may support low interest rates for now. Inflation could rise again starting in Q2 2025; as such, we expect rate normalisation in Q2,” Tim Leelahaphan, Standard Chartered economist for Thailand and Vietnam, said.
“Fed moves will also be key to the SBV’s policy decisions, in our view. Lower US dollar rates may help to reduce capital outflows, while a sustained trade surplus and strong tourism should support the Vietnamese; however, low import cover remains a challenge,” he added.
Fibre2Fashion News Desk (DS)
