Vietnamese Dong: Constructive but upside constrained – Commerzbank

Commerzbank’s Asia FX team highlights a constructive near-term outlook for the Vietnamese Dong (VND), supported by strong Foreign Direct Investment (FDI) inflows and robust growth. USD/VND stayed around 25,994, below its July peak, leaving VND about 1.2% stronger year-to-date. However, higher Oil prices, a widening trade deficit and elevated US yields are seen limiting significant appreciation, with SBV focused on balancing growth and inflation.

Vietnam Dong supported by FDI

"September CPI rose 5.1% yoy vs 4.9% in August, matching market expectations and pushing average inflation in January–September to 4.52%, marginally above the government’s 4.5% target."

"Near-term VND prospects remain relatively constructive given robust realised FDI and strong growth, but higher oil prices, the widening trade deficit and still-elevated US yields argue against expecting significant appreciation. With inflation above target and credit expanding rapidly, the SBV is likely to remain focused on balancing growth support against inflation, banking-system liquidity and exchange-rate stability."

"This suggests that the latest acceleration in headline CPI remains predominantly supply-driven. However, with capital formation expanding above 20%, consumption still growing strongly and capacity constraints emerging, demand-side inflation risks are becoming more material. Together with elevated oil prices, this reduces the SBV’s room to provide additional monetary support despite the government’s aggressive growth objective."

"In FX, USD/VND was steady around 25,994 yesterday, holding below the July peak of 26,340 and leaving the VND about 1.2% stronger against the USD year-to-date."