Dong Weakness Grows as Vietnam Boosts Infrastructure Spending

The Vietnamese dong reached a new record low of 26,401 per dollar, driven by increased government infrastructure spending and adverse impacts on exports from US trade policy. This depreciation, which saw the dong weaken 0.1% on Thursday, is projected to continue, with MUFG Bank forecasting 26,500 by year-end and Ho Chi Minh City Securities expecting 26,600 by end-2025, citing higher import needs and a narrowing current-account surplus.

Analysis

The Vietnamese dong (VND) has depreciated to a new record low, weakening 0.1% to 26,401 per dollar, reflecting sustained pressure from both domestic and external factors. The currency's decline is attributed to a government-led infrastructure spending initiative, which is likely increasing demand for imported goods and foreign currency, alongside adverse impacts on the nation's exports stemming from US trade policy. This dynamic is expected to persist, as evidenced by institutional forecasts. MUFG Bank projects the dong will weaken further to 26,500 per dollar by the end of the current year, explicitly citing rising import requirements and a consequent narrowing of the current-account surplus. Reinforcing this pessimistic outlook, Ho Chi Minh City Securities anticipates a continued slide to 26,600 per dollar by the close of 2025, signaling a prolonged period of currency weakness.

Key Decisions for Investors

• Given the consensus analyst forecasts for continued depreciation through 2025, investors with long exposure to the Vietnamese dong should consider implementing hedging strategies to mitigate currency risk.
• The combination of expansionary fiscal policy and external trade pressure points to a fundamental strain on Vietnam's current-account surplus, a key metric for investors to monitor for signs of further economic imbalance or policy response.
• For those invested in Vietnamese equities, a weakening dong can erode returns when repatriated into US dollars, warranting a careful assessment of currency-adjusted performance and risk.