Exchange rate pressure returns as trade war escalates

This week, the SBV returned to net liquidity withdrawal at a moderate level by rolling over repo contracts to ease maturing obligations. As a result, interbank rates declined across tenors, while USDVND came under renewed pressure. On the global front, the greenback weakened for the fourth consecutive week due to mounting fears over escalating global trade tensions, rising inflationary pressures, and potential recession risks—eroding its safe-haven appeal under President Trump’s policies. Domestically, despite the weakening dollar, USDVND surged as Vietnam remains among the top targets of Washington’s reciprocal tariffs, prompting a rise in USD demand as a hedge against potential shocks. On a positive note, the government’s proactive efforts in negotiating with the U.S. could help reduce the tariff burden Vietnam might face over the next three months, thereby contributing to exchange rate stability.