Vietnam is guiding the Dong lower as US tariffs threaten exports
Vietnam is using the age-old tactic of currency depreciation to gain a competitive advantage over its Southeast Asian peers as nations look for ways to ease the burden from US President Donald Trump’s trade tariffs.
The State Bank of Vietnam has been steadily guiding the dong weaker this year, its currency fixings show. The daily reference rate for the dollar-dong pair has climbed about 3.5% in 2025, poised for its steepest annual gain since 2011, according to data compiled by Bloomberg. The dong is trading near a record low reached in August, with analysts forecasting further declines as the central bank is expected to maintain a weaker bias.
Vietnam, an export powerhouse that sells everything from coffee and clothing to engine parts, is grappling with a tariff rate of 20%, a percentage point more than for neighbors Indonesia, Malaysia, the Philippines and Thailand. Vietnamese authorities need to strike a fine balance when it comes to its currency policy, given the risk of greater scrutiny from the US, which has kept the Southeast Asian nation on its watchlist for foreign-exchange practices.
“Gradually weakening the dong would allow Vietnam to slowly regain trade competitiveness in the US market,” said Darren Tay, head of APAC country risk at BMI. BMI, a Fitch Solutions unit, projects the currency at 27,000 by the end of 2025.
Malayan Banking Bhd expects the dong to fall to 26,600 per dollar by December from 26,379 on Thursday, and extend losses to 26,700 in the first quarter of next year.
Central bank officials in Vietnam didn’t respond to requests for comment, including several calls. Deputy Governor Pham Thanh Ha has said the authority will continue to manage the dong in a flexible manner and use monetary policy tools to keep the FX market stable, to help boost the economy and control inflation.
Vietnam’s strategy isn’t new. China, which also manages its currency, allowed the yuan to fall past the key level of 7 per dollar in 2019 during Trump’s first trade war.
Still, the SBV’s weakening bias has helped push the dong near the lowest in at least two decades against the Thai baht, and the weakest since 2014 against the Malaysian ringgit.
“The dong’s decline has greatly supported our exports at a time when Vietnamese firms are struggling with US tariffs, and helped ease cost pressures,” said Pham Xuan Hong, chairman of the Ho Chi Minh City Garment and Textile Association. Other exporters echoed the view, saying a weaker dong makes it easier to sell overseas, he added.
Meanwhile, some regional peers, such as Indonesia are trying to curb the depreciation in their currencies. Bank Indonesia, for instance, has been actively intervening in the market to contain the rupiah’s weakness.
Growth Risks
Exports account for about 90% of Vietnam’s gross domestic product, with net shipments to America making up about one-fifth of the economy.
The World Bank earlier this month cut Vietnam’s 2025 growth forecast to 6.6% from 6.8%, citing expectations of weaker exports to the US. The nation’s exports rose 14.5% in August from a year earlier to $43.39 billion, below expectations for 15.5% growth.
Risks are tilted toward dong underperformance if external fundamentals weaken substantially, said Han Teng Chua, senior economist at DBS Bank Ltd. While the dong is expected to correct by year-end on a softer dollar as the Fed eases, Vietnam’s heavy-export reliance on the US market leaves the currency vulnerable, he added.
By Malavika Kaur Makol & Nguyen Dieu Tu Uyen – Bloomberg – September 19, 2025