Vietnam Dollar Weakens Against Dong, Eyes Weekly Decline

The Vietnamese dong saw a slight depreciation against the U.S. dollar on Friday morning, though it was on track for a weekly improvement against major peers. The State Bank of Vietnam (SBV) also raised its reference rate, influenced by a global trend of dollar weakening. Vietcombank sold the greenback at VND26,440 on Friday morning, a 0.04% drop from Thursday. In the less formal black market, the currency rose 0.18% to around VND26,529. The SBV hiked its reference rate by 0.04% to VND25,254, a move likely aimed at stabilizing the domestic financial market. Globally, the U.S. dollar held steady on Friday but was poised for a weekly decline as a softer-than-expected U.S. inflation report this week led traders to cut bets on imminent rate hikes from the Federal Reserve. However, escalating attacks in the Middle East have soured sentiment, Reuters reported. The dollar index, which measures the U.S. currency against six other units, was at 100.72, set for a weekly drop of 0.24%. The index hit a one-month low earlier this week on easing chances of a near-term rate hike, but safe-haven flows have helped support the greenback. The euro was at $1.1445, set for a 0.29% rise in the week. Sterling fetched $1.3476, on course for a 0.56% gain in the week, its third straight week of gains on fading concerns over Britain's fiscal outlook. The Japanese yen was fetching 162.39 per U.S. dollar, rooted near the 40-year low of 162.84 it touched at the start of the month. "Near-term FX price action is likely to continue reflecting the 'USD smile' framework, under which the greenback tends to outperform when markets price either stronger U.S. growth and higher rates or a rise in global risk aversion," OCBC strategists said in a note. In Vietnam's one-party system, the central bank's management of the exchange rate serves dual purposes: maintaining economic stability and preserving export competitiveness. The slight depreciation of the dong could encourage exports but also potentially fuel import costs and inflationary pressures. The dong's movement against the Chinese yuan is also a key factor for Vietnam's trade balance, especially given their close economic ties.