(Bloomberg) -- Vietnam’s central bank said it’s keeping a close eye on the local currency which fell to a record low last week, with Deputy Governor Dao Minh Tu pledging to stabilize the dong while keeping inflation on an even keel.
The State Bank of Vietnam will “closely monitor the market situation to manage exchange rates flexibly and appropriately, while synchronously coordinating it with other monetary policy tools to control inflation and ensure macroeconomic stability,” according to a statement issued Tuesday as SBV officials held a briefing.
The SBV will maintain a flexible monetary policy, according to the statement. Earlier in the briefing, Tu described the policy stance to be appropriate amid recent calls for some tightening to steady the dong. The strength of the US dollar after Donald Trump won the US presidency is impacting global currency markets including Vietnam, according to Pham Chi Quang, the head of SBV’s monetary policy department, at the same event.
The dong rose to 25,378 per dollar after the SBV remarks, poised to extend gains for a four straight day. It fell about 5% in 2024, hitting a record low in the last two days of the previous year.
The outperformance of Vietnam’s economy last year, along with manageable inflation, gives the monetary authority scope to consider policy tightening. In 2023, the SBV delivered among the region’s early monetary easing when it cut the refinancing rate, one of the key levers used by the central bank to guide borrowing costs, three times to 4.5% from a peak of 6%.
While the base case is for Vietnam to maintain monetary policy steady this year, “we do not rule out the risk the SBV could be forced to hike policy rates or devalue the currency, in the event of persistent US dollar strength,” Malayan Banking Bhd analysts Brian Lee Shun Rong and Chua Hak Bin wrote in a note on Monday.
Maybank estimates that with repeated intervention, Vietnam’s foreign currency reserves plunged to about $80 billion by the end of 2024 from peak of $109.6 billion in January 2022. Vietnam doesn’t give updates on its FX reserves.
Asia’s growth star posted a 7.09% economic expansion in 2024, putting it in a strong position to achieve growth of at least 8% this year. Still, officials remain wary of the impact from Trump’s threat to impose broad tariffs.
The central bank targets credit growth of 16% this year to help meet its economic growth target. Loans grew 15.08% by the end of 2024, Tu said. He also said the SBV is working on a restructuring plan for Saigon Commercial Bank.
“The State Bank will continue to closely monitor market developments and economic situations domestically and internationally to have flexible monetary policies and measures to control inflation, contributing to economic stability and stabilizing the currency and foreign exchange markets,” the SBV said in a statement.
--With assistance from Prima Wirayani.
(Recasts with comments on local currency and more details.)
©2025 Bloomberg L.P.