Greater but limited pressure on the USD/VND exchange rate
In a report on the impact of the Fed’s interest rate hike on the global and Vietnamese economies, Dr Can Van Luc, chief economist at BIDV, and researchers from the BIDV Institute for Economic Research said the Fed’s decision on September 16 to raise its policy rate by 0.25 percentage points marked a notable shift in US monetary policy.
It could alter expectations regarding global interest rates, exchange rates, capital flows and the cost of capital going forward, including in an open economy such as Viet Nam.
The Fed’s rate adjustment is expected to have a significant impact on Viet Nam’s goods exports since the US is Viet Nam’s largest export market.
In the short term, demand will hold up, but prolonged high interest rates could slow consumption and investment in the US, affecting Viet Nam’s exports to the world’s largest economy.
At the same time, higher interest rates in some other markets, such as the EU, Japan and the Republic of Korea, will also reduce overall demand for Vietnamese exports, making it difficult for exports to maintain their current strong growth rate.
Room for domestic interest rate cuts will become more limited as the Fed raises interest rates. According to the researchers’ analysis, the State Bank of Viet Nam currently maintains its refinancing rate at 4.5% per year, while 6- to 12-month deposit rates at many banks range from 7-9% per year.
Interest rates came under upward pressure from the fourth quarter of 2025 through the end of the first quarter of 2026 and have remained stable since the beginning of the second quarter. Lending rates have edged down for some credit packages, customer groups and priority sectors.
However, as US dollar interest rates and those of some other currencies rise, there will be less room for lending rate cuts in the short term, particularly if the Fed raises interest rates again at the end of 2026. As a result, diversifying funding sources and allocating capital efficiently will become even more important for both borrowers and lenders.
The report also noted that the Fed’s rate hike would increase pressure on the USD/VND exchange rate, but not significantly. Exchange rate developments since the beginning of the year have been relatively favourable, mainly because Vietnamese dong interest rates across maturities have remained higher than US dollar interest rates, increasing the attractiveness of holding Vietnamese dong.
After years of being a net repayer of foreign capital, Viet Nam returned to net foreign-currency borrowing in 2026, helping offset domestic foreign-currency supply shortages. The gap between domestic and global gold prices narrowed, while gold smuggling declined, reducing demand for foreign currency.
With this rate hike, which was in line with market expectations, pressure on the USD/VND exchange rate is limited as the VND-USD interest rate differential remains positive, averaging around 0.5 percentage points.
However, if the Fed makes another rate hike in December 2026, the VND-USD interest rate differential will narrow, while the US dollar will appreciate in international markets, creating some pressure on the USD/VND exchange rate.
USD/VND exchange rate developments in the coming period will depend mainly on the Fed’s interest rate hike path, the trade balance and international capital flows.
The latest rate adjustment will also slightly increase inflationary pressure and Viet Nam’s foreign-currency debt-servicing costs. The Fed’s rate hike could affect inflation in Viet Nam mainly through two channels: a stronger US dollar will increase import costs, while persistently high global energy prices will raise fuel, transport and production costs, thereby putting pressure on the prices of goods and services.
This risk warrants attention as the consumer price index (CPI) in August 2026 increased 0.47% from the previous month and 4.89% year on year. Average CPI rose 4.45% year on year, close to the target threshold of 4.5%, while core inflation increased 4.24%.
In addition, businesses with USD-denominated debt and debt in some other major currencies but whose revenues are mainly in Vietnamese dong could face a double impact from higher US dollar interest rates and a slight depreciation of the dong, increasing both borrowing costs and the value of their debt obligations when converted into Vietnamese currency.
Therefore, the researchers said that balancing growth with inflation control and exchange rate stability would remain a priority for Viet Nam.
High growth coupled with macroeconomic stability
On the impact on investment capital flows, the researchers said that, for indirect investment flows, higher yields in the US and an appreciating US dollar would increase the required return on assets in Viet Nam, against the backdrop of foreign investors having recorded net sales of 92 trillion VND since the beginning of 2026.
This pressure could be partly offset by capital inflows into Viet Nam following FTSE Russell’s upgrade of Viet Nam to secondary emerging market status, effective September 21, 2026. A risk to monitor is that margin lending currently stands at around 450 trillion VND, increasing the market’s sensitivity during periods of sharp volatility.
For foreign direct investment, the impact is generally slower because investment decisions depend largely on long-term prospects, positioning in supply chains, production costs and the investment environment. However, prolonged high international capital costs could still delay some new investment decisions and affect disbursement progress.
In light of these issues, the researchers recommended that the Government remain steadfast in pursuing the goal of high growth coupled with macroeconomic stability and inflation control.
This should include keeping monetary policy management flexible and responsive; effectively coordinating monetary and fiscal policies; ensuring the stability of interest rates and exchange rates to help control inflation and support growth; closely monitoring developments in international financial and monetary markets; and developing scenarios in case the Fed raises interest rates rapidly, leading to volatility in global and Vietnamese financial markets.
In addition, the researchers recommended developing a roadmap and coordinating well-timed adjustments to the prices of state-managed goods and services, avoiding abrupt or poorly timed changes. They also called for monitoring and assessing foreign debt-servicing obligations as the Fed raises interest rates, to give businesses timely warning and prepare plans for government debt servicing.
They also suggested keeping exchange rate management flexible and responsive to help control inflation and support businesses, particularly those with high levels of foreign debt.
This should include closely monitoring exchange rate developments, indirect investment flows, margin lending and the risk of forced selling in the stock market, and capitalising on the stock market upgrade to attract medium- and long-term capital and reduce reliance on short-term capital flows, while strengthening oversight to control financial and capital-flow risks.
