USD/VND to drift lower towards 22870 as Vietnam and US reaches a deal on FX – DBS Bank

The US Treasury and the State Bank of Vietnam have reached an agreement with respect to Vietnam’s FX management practices. Subsequently, economists at DBS Bank have revised their end-2021 USD/VND forecast to VND22,870 per USD.

Implications of the currency truce with the US

“Increased FX flexibility would allow for external adjustment during shocks, making a gradual step towards monetary policy reforms.”

“Promising foreign investment and US export outlook as Vietnamese government pursuits increased manufacturing exposure.” 

“We are revising our end-2021 FX forecast stronger to VND22,870 per USD (from VND23,070 per USD previously).”

“The currency’s volatility is likely to be modest despite the central bank’s increased commitment to exchange rate flexibility.”