The VND is expected to further weaken against the USD, according to StanChart. Photo: Internet
The Vietnamese dong (VND) is expected to further weaken on broader USD strength and depreciation of the Chinese yuan (CNY), Standard Charterted Bank has said in a note released late on Nov. 25.
The pace of depreciation of the VND against the USD has picked up recently. Having held within a relatively narrow range of over 100bps from January-August 2016, the daily USD-VND fixings then began to creep higher.
After staying steady below 22,500 for most of the year, USD-VND spot has surged above that level and is now trading very close to the weak 3% limit of the trading band.
While Vietnam’s economy has been strong, the USD-VND move echoes similar depreciation in other Asian currencies. This shows the VND is not immune to broader USD strength following Trump’s election victory and the depreciation of the CNY, according to the UK bank.
exchange rate is projected to rise to 22,900 in Q4/2016, 23,000 in Q1/2017 and climb to 23,300 in Q4/2017.
Bank forecast Vietnam’s economic growth at 6.0% year-on-year in 2016, lower than the government’s downwardly revised target of 6.3-6.5%.
“We expect growth to pick up further to 6.6% y/y in 2017 on still-strong domestic growth. Inflation is likely to edge up further in H1-2017 before stabilizing on higher food inflation,” says the note.
The bank expects FDI
inflows into Vietnam to slow in 2017, but remain at a high level. Forex reserves are reported to have risen to over $41 billion as of end-October, the highest level on record and up $12 billion from end-2015 levels.