Vietnam Currency Probe

[HowieC]

Economics

Trump Administration Set to Announce Vietnam Currency Probe

By 

Jenny Leonard

 and 

Saleha Mohsin

September 30, 2020, 3:00 PM PDT Updated on October 1, 2020, 2:21 AM PDT

 

 

The Trump administration plans to announce an investigation into Vietnam’s currency practices, according to three people familiar with the matter.

The probe, undertaken through section 301 of the 1974 Trade Act, would come after the Departments of Commerce and Treasury in August determined Vietnam had manipulated its currency in a specific trade case involving tires, the people said. The announcement could come as soon as this week, said the people, who asked not to be identified.

 

In the Crosshairs

Vietnam has fourth-highest trade surplus with U.S. this year

Source: U.S. Commerce Department

 

“Vietnamese relevant agencies are now in contact with the U.S. side to verify this information,” Foreign Ministry spokeswoman Le Thi Thu Hang said during a briefing in Hanoi when asked about the Bloomberg News report.

Vietnam is among the U.S.’s 10 biggest trading partners. The U.S.’s goods-trade deficit with the Asian nation this year reached $34.8 billion by July, the biggest after the shortfalls with China, Mexico and Switzerland.

The Trump administration used a so-called 301 investigation against China to apply tariffs on billions of dollars worth of imports that initiated the trade war between the world’s two biggest economies.

Vietnam is one of the Southeast Asian countries “caught in the U.S.-China crossfire and Trump’s angst over trading partners’ currency manipulation,” said Linda Liu, an economist at Maybank Kim Eng Research Pte. in Singapore. The investigation “has increased the chances of the U.S. imposing tariffs on Vietnam. But the tariffs will likely be targeted and product-specific, rather than sweeping.”

This “warning shot” to Vietnam also might put other regional economies on guard, including Thailand and Malaysia, she said.

Countervailing Duties

A new federal rule published this year allows the U.S. Commerce Department to treat currency undervaluation as a factor in determining countervailing duties on a trading partner.

Vietnam’s central bank has moved to a more market-based framework of setting the currency since 2016, adjusting the dong’s reference rate on a daily basis. It allows the dong to trade within a band of 3% on either side of the reference rate, which is based on eight currencies.

 

 

Market reaction in Vietnam was subdued on the news of the U.S. probe. The benchmark VN Index of Vietnamese stocks rose 0.7% as of 9:23 a.m. local time Thursday as investors reacted to this week’s interest-rate cuts. The dong’s reference rate was set by the central bank at 23,213 per dollar Thursday, and the currency traded at 23,184 per dollar as of 10:15 a.m. in Hanoi, unchanged from Wednesday, according to data from commercial banks compiled by Bloomberg.

These types of currency investigations usually take months, so any imposition of tariffs as a result wouldn’t likely occur before the U.S. presidential election in November.

Spokespeople for the Commerce Department and the U.S. Trade Representative didn’t immediately respond to a request for comment. Treasury referred comments to them.

— With assistance by Nguyen Dieu Tu Uyen, Michelle Jamrisko, Nguyen Kieu Giang, and John Boudreau

 

 

https://www.bloomberg.com/news/articles/2020-09-30/trump-administration-plans-to-announce-probe-on-vietnam-currency?fbclid=IwAR20TFM5LZDhdCQdgfStW9GFCXXBymYyqxMxzbeZ77ln7nRUE_8sYoRr6xo

[southbeach]

Keep articles coming Howie. I like Vietnam.

[screwball]

On 10/4/2020 at 8:15 AM, HowieC said:

These types of currency investigations usually take months, so any imposition of tariffs as a result wouldn’t likely occur before the U.S. presidential election in November.

so it looks like now TRUMP is back in this will become an issue....makes you wonder how much money they get from the US to subsidize, I see Burma just got 40,000,000 per year frozen.....DOGE and TRUMP working their UST magic! Vietnam is coming!

[southbeach]

FACT

[screwball]

On 2/6/2025 at 9:12 PM, southbeach said:

FACT

https://asiatimes.com/2017/10/time-vietnam-lop-zeros-off-currency/# this fro 2017...hmmmm wonder how relevant it is today with trumps tariffs

[screwball]

On 2/3/2025 at 1:41 PM, screwball said:

so it looks like now TRUMP is back in this will become an issue....makes you wonder how much money they get from the US to subsidize, I see Burma just got 40,000,000 per year frozen.....DOGE and TRUMP working their UST magic! Vietnam is coming!

 

[screwball]

On 10/4/2020 at 8:15 AM, HowieC said:

Vietnam is one of the Southeast Asian countries “caught in the U.S.-China crossfire and Trump’s angst over trading partners’ currency manipulation,” said Linda Liu, an economist at Maybank Kim Eng Research Pte. in Singapore. The investigation “has increased the chances of the U.S. imposing tariffs on Vietnam. But the tariffs will likely be targeted and product-specific, rather than sweeping.”

This “warning shot” to Vietnam also might put other regional economies on guard, including Thailand and Malaysia, she said.

BOOM!

[screwball]

I asked chat GPT about the dong....

 

Great question — but it’s also a tricky one, because the "right" exchange rate for Vietnam (or any country) depends on a lot of moving parts. Let's break it down a bit.

1. Which exchange rate?

Vietnam mainly manages its dong (VND) against the US dollar (USD), although it's influenced by a basket of currencies. So most people are asking about the USD/VND rate.

As of early 2025, the exchange rate is hovering around 24,500–25,500 VND per USD, depending on market movements and the central bank's interventions.

---

2. What determines the “correct” rate?

There’s no single correct number, but economists look at a few key models:

✅ Purchasing Power Parity (PPP)

This compares how much a basket of goods costs in Vietnam vs. the U.S.

• If a Big Mac costs 50,000 VND in Vietnam and $5 in the U.S., PPP suggests an exchange rate of 10,000 VND/USD.

• But Vietnam's actual rate is closer to 25,000, so by that measure the dong is undervalued.

✅ Real Effective Exchange Rate (REER)

This adjusts for inflation and trade with many countries. If Vietnam keeps inflation low while its trading partners don’t, the dong should strengthen.

✅ Balance of Payments / Trade Balance

Vietnam has a strong trade surplus, especially with the U.S. That usually puts upward pressure on a currency — so again, that would suggest a stronger dong than what the current rate shows.

---

3. Why doesn’t Vietnam let the dong float freely?

Vietnam uses a "managed float" system. The State Bank of Vietnam (SBV) intervenes to avoid big swings because:

• A weaker dong helps exports (which are key to Vietnam’s economy)

• A stable dong helps foreign investment and keeps imported inflation in check

Too much volatility could hurt investor confidence, or cause panic about inflation.

---

4. So… what should it be?

There’s no perfect answer, but based on PPP and trade flows:

• The dong may be undervalued by 10–30% depending on the method

• But that undervaluation helps Vietnam stay competitive in global markets, so it’s kind of intentional

If Vietnam floated the dong, it might appreciate modestly, but policymakers likely want to avoid that right now, especially with global economic uncertainty and efforts to keep exports strong.

[screwball]

as an investor this was the answer...

 

ot it — you're looking at this from an investor’s perspective, which changes the game a bit. Let’s focus on what you really need to know as someone putting capital into or around Vietnam, whether in equities, fixed income, FDI, real estate, or currency itself.

---

📉 Is the VND undervalued?

Yes, moderately, and probably on purpose. Based on PPP and Vietnam’s consistent trade surplus, the dong should be stronger. But the government prefers stability over accuracy, which benefits exporters and long-term investors.

Undervaluation is not necessarily bad — it creates tailwinds for:

• Export-driven companies

• Foreign manufacturers setting up in Vietnam

• Long-term USD-based investors (your dollar stretches further)

---

🏦 Currency strategy of the State Bank of Vietnam (SBV)

SBV is pragmatic, not ideological:

• They manage a soft peg to the USD with some flexibility

• Use a reference band (daily trading band), currently ±5%

• Will intervene to keep the dong from sliding too far or appreciating too fast

Implication for you:

• Low risk of a currency shock

• High probability of modest depreciation (2–3% per year) over the long term, which is manageable and can be hedged

---

💰 Macro trends that matter to you

Bullish for the dong:

• Strong FDI inflows (esp. from China+1 strategy)

• Massive trade surplus, especially with the U.S. and EU

• Rising foreign reserves

• Gradual de-dollarization (Vietnam reducing reliance on USD)

Risks to watch:

• U.S. Fed policy: Higher U.S. interest rates = pressure on emerging markets

• Inflation shocks or commodity price spikes

• Regional competition (Thailand, Indonesia also trying to attract FDI)

---

📈 How to position yourself

✅ If you’re in equities:

• Exporters (textiles, electronics, seafood) benefit from a weaker dong

• Domestic consumption plays (retail, logistics, fintech) may benefit from long-term dong strength

✅ If you’re in fixed income:

• Vietnam’s local bonds have decent yields, but watch currency depreciation

• Consider hedging VND exposure unless you’re very bullish long term

✅ If you’re looking at real estate or FDI:

• Stable currency + undervaluation = good entry point

• Strong upside if the dong is allowed to strengthen in 3–5 years

✅ If you’re in FX or macro trades:

• VND isn’t fully free-floating, so short-term trades are limited

• But a long VND position vs. USD or JPY could be solid long-term, especially with rising reserves and strong fundamentals

---

🔍 Bottom line

The "should-be" rate might be closer to 22,000–23,000 VND/USD, but SBV is keeping it near 24,500–25,500. As an investor, the dong offers:

• Stability

• Slow, managed depreciation

• Undervaluation with upside potential over the long term

If you're in it for the long haul, that’s a pretty solid combo — especially compared to higher-volatility EMs like Argentina or Nigeria.

[screwball]

If Vietnam suddenly allowed the dong to freely float, you'd see a big shift in the investment landscape. Whether it's a win or a mess depends on how prepared the market is, how global investors react, and how the government handles the transition.

Let’s break it down from an investor’s lens:

---

🔄 Immediate Impact: Volatility Surge

• Currency volatility would spike — both locals and foreign investors would test the waters, likely leading to a sell-off in VND in the short term.

• Speculators would jump in, betting on both sides of the move.

• Companies and banks with USD liabilities might rush to hedge, pushing the dong weaker.

Expect the dong to depreciate initially, even though fundamentals suggest it could strengthen — classic “buy the rumor, sell the fact” market reaction.

---

💹 Medium-Term: Market Forces Take Over

Here’s where fundamentals matter:

• Vietnam’s trade surplus, strong FDI inflows, and growing reserves would start to support the dong.

• Once the dust settles, the dong could appreciate — maybe back to 23,000–24,000/USD, depending on global conditions.

But this assumes:

• The SBV doesn’t re-intervene

• Capital controls don’t spook investors

• The banking system can handle currency swings

---

📉 Risk Scenarios (and why the SBV is cautious)

• Imported inflation: If the dong weakens, imported goods (like fuel, electronics, machinery) get pricier → consumer inflation spikes

• Exporters lose their edge: If the dong strengthens too fast, textile, seafood, electronics sectors could take a hit

• Debt servicing stress: Vietnamese firms with USD-denominated debt (often used in real estate and infrastructure) would face higher repayment costs if the dong weakens

• Capital flight risk: If investors think a float = instability, they might pull capital → even more depreciation

---

📈 Opportunity for Investors

If you’re watching for long-term positioning, a free float could create short-term noise but long-term value:

✅ Currency:

• A dip in VND would be a buying opportunity if you believe in Vietnam’s fundamentals

• Think of it like Indonesia or India after past currency liberalizations — bumpy, then booming

✅ Equities:

• Exporters may face pressure if the dong strengthens, but import-heavy sectors (retail, autos, logistics) benefit

• Banks could see margin swings depending on hedging practices

✅ Fixed Income:

• Higher volatility means higher yields, but FX risk becomes harder to predict

• Hedging costs could rise

✅ FDI / Real Assets:

• Big upside if the dong strengthens long-term — you’re locking in assets at a now-undervalued currency

• Might delay some investments if near-term uncertainty is high

---

🧭 Bottom Line

If Vietnam floated the dong:

• Short-term: Volatility, possible depreciation, speculative flows

• Medium-term: Market rebalances, dong likely strengthens if fundamentals hold

• Long-term: More transparent markets, higher foreign investor confidence — but only if it’s well-managed

As an investor, you’d want:

1. A watchlist of VND-sensitive sectors

2. A plan for FX hedging or exposure

3. An eye on capital control policies, because Vietnam’s not going to give up control overnight

---

Want to simulate what a free-float might do to a specific investment — like a VND bond fund, an export-heavy stock, or an FDI-backed real estate project?

[screwball]

no with huge changes to tariffs would this force a revaluation...."some up, some down and some would stay the same"

[screwball]

if they have a trade surplus of 39 billion per year what will free trade and zero tariffs do to them?

[screwball]

1 minute ago, screwball said:

✅ Currency:

• A dip in VND would be a buying opportunity if you believe in Vietnam’s fundamentals

• Think of it like Indonesia or India after past currency liberalizations — bumpy, then booming

✅ Equities:

🚀⏰

[md11fr8dawg]

Got all the dong I need or want, maybe too much the way things are going.

[southbeach]

Everything I read above leads me to believe the VND will never upward revalue.  I was just about to buy more, it being so cheap, but now I’m not.  Thanks