MONETARY MARKET UPDATE JUN 2025: THE AMPLE VND LIQUIDITY AMID TIGHT USD SUPPLY-DEMAND BALANCE
The State Bank of Vietnam (SBV) conducted net liquidity withdrawals for the third consecutive month in June 2025. A notable development this month was the SBV’s resumption of bill issuance after more than three months of suspension, driven by a sharp decline in overnight lending rates.Credit growth accelerated significantly from the end of Q1 and maintained steady momentum throughout the first two months of Q2. While deposit interest rates remained relatively stable and credit growth was robust, commercial banks actively raised capital through bond issuance at a scale double that of the same period last year.
The USD/VND exchange rate continued to move contrary to the trend of other Asian currencies in June 2025. The approaching expiration of delaying reciprocal tariff, combined with a renewed negative VND-USD interest rate differential in June, pushed pressure on the exchange rate outlook. However, the current level of depreciation remains under control along with the SBV’s proactive interventions. These pressures could gradually ease if negotiation outcomes align with expectations and the SBV intervenes in the open market to narrow the VND-USD interest rate gap.
Nonetheless, in the second half of 2025, the foreign currency supply-demand balance is expected to remain tight due to three factors: 1. The trade surplus has been gradually shrinking in recent months; 2. Foreign investment flows are shifting as tariff-related uncertainties become clearer; and 3. Economic growth pressures are prompting increased credit and public investment, raising concerns that inflation expectations may rise in the future, potentially boosting demand for USD hoarding.
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