How Vietnam Stabilized the USD/VND Rate Through Targeted FX Interventions

Economic

Forex

Summary:

After facing mounting pressure for most of 2025, the Vietnamese đồng showed its first monthly recovery in October, driven by proactive interventions from the State Bank of Vietnam (SBV) and improving trade sentiment...

Recent Stabilization: A Shift in the USD/VND Exchange Rate Trajectory

Vietnam’s USD/VND exchange rate recorded a rare 0.34% monthly decline in October 2025, a modest yet significant reversal after sustained pressure throughout the year. According to data from the Ministry of Finance's General Statistics Office, the exchange rate remained 5.54% higher than the same period last year and 3.62% higher than the end of 2024. On average, the rate rose 3.98% over the first ten months of 2025, reflecting steady depreciation of the đồng in the face of strong foreign currency demand from import-export businesses and investors.

The turnaround in October, as reported by UOB Bank, was facilitated by improved international trade sentiment and SBV’s ongoing liquidity support for domestic banks. This environment helped stabilize foreign exchange expectations and curbed short-term speculation in the official market.

Divergence Between Official and Unofficial Markets

Contrary to the slight appreciation in the official rate, the free market exchange rate surged to 27,830 VND/USD over 8% higher year-to-date. According to MBS Research, this sharp rise stemmed primarily from the widening gap between domestic and international gold prices, which spurred unofficial USD hoarding. The speculative environment was further exacerbated by tightening USD cash supply in the unofficial sector, prompting SBV to intensify foreign exchange inspections with relevant ministries.

This divergence reflects a correlation, not causality, between the gold premium and the exchange rate gap: the rise in domestic gold prices increased the incentive to hoard USD in unofficial channels, widening the disparity without necessarily causing official rate fluctuations.

Additionally, the market faced seasonal pressures from rising unofficial gold imports, corporate and household foreign currency hoarding, and anticipation of continued đồng depreciation. These factors cumulatively strained USD liquidity outside the banking system and reinforced exchange rate volatility.

Trade Agreements and Economic Recovery Help Ease FX Pressures

Improved external conditions further contributed to easing pressures. The U.S. introduced new trade frameworks, offering zero-tariff benefits to certain Vietnamese exports and reducing import duties on American agricultural and industrial goods. UOB highlighted that these developments could improve Vietnam’s trade balance and enhance exchange rate stability.

Moreover, stronger exports, steady foreign direct investment (FDI) inflows, and a slowdown in import growth have rebalanced foreign exchange supply and demand, reducing the urgency for large-scale FX interventions.

Three Rounds of FX Intervention: SBV’s Tactical Response

Between late August and October 2025, the SBV intervened three times in the foreign exchange market using forward contracts totaling approximately USD 4.4 billion. These interventions occurred on August 25–26, October 1, and October 22. The goal was not to flood the market with USD but to temper volatility and await organic sources of USD, such as remittances and export proceeds.

By using six-month forward contracts, SBV provided short-term USD liquidity without immediately impacting spot exchange rates. This mechanism allowed commercial banks to hedge future currency needs while maintaining current FX reserves.

This policy reveals a causal relationship between market volatility and the timing of SBV’s intervention: SBV acted when interbank rates surged above 6% and USD/VND approached its ceiling, especially on October 22, when USD liquidity stress and speculation peaked.

Unlike the previous two interventions, the late October move came during a time of tighter VND interbank rates and a reversal in the VND-USD interest rate differential, making the intervention more effective. In earlier phases, when VND rates were lower and USD demand was purely speculative, such interventions had limited impact on actual spot rates.

Medium-Term Outlook: Stabilization Likely, But Limited Upside

UOB remains cautious about the đồng’s mid-term prospects. While Vietnam’s flexible FX management has yielded short-term success, the country’s currency is expected to underperform regional peers. UOB projects a gradual appreciation of the VND, forecasting the USD/VND to decline from 26,330 in Q4 2025 to 26,000 by Q3 2026 — a modest gain of 1.25% over 12 months.

This projected path reflects a deliberate and measured approach by SBV to avoid sharp fluctuations while maintaining external competitiveness. The absence of large-scale external shocks and a stable domestic monetary environment underpin this view.

Domestically, Techcombank’s analysts also expect the exchange rate to cool by year-end, supported by declining USD demand from FDI firms post-profit repatriation season, robust remittance inflows, and seasonal export strength. Kafi Securities echoed this view, adding that the interbank rate hike and the Fed’s expected rate cuts in 2026 will help narrow the VND-USD interest gap, further anchoring exchange rate stability.

The recent strength of the Vietnamese đồng is not merely coincidental but the product of deliberate and phased interventions by the SBV, aimed at managing market expectations without sacrificing monetary stability. While the đồng is poised to stabilize in the coming quarters, its appreciation potential remains muted relative to other Asian currencies. Nonetheless, Vietnam’s combination of improving external accounts, trade diplomacy, and cautious FX policy offers a credible pathway to restoring balance in its currency markets.

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