Vietnam Dong: Stable despite widening trade deficit – Commerzbank

Commerzbank analysts have observed that Vietnam's July inflation rate declined to 4.5% year-on-year, maintaining the average near the 4.5% target. Meanwhile, the trade deficit increased to USD 3.6 billion, primarily due to a surge in imports of energy and capital goods. Despite external challenges and potential risks stemming from the EU's Carbon Border Adjustment Mechanism (CBAM) and US anti-dumping measures on Vietnamese steel products, the USD/VND exchange rate has remained stable around 26,277, with the Vietnamese dong showing a slight uptick year-to-date.

The widening trade deficit, which totaled USD 3.6 billion in July (above the Bloomberg consensus of USD 2.5 billion) and marked the eighth consecutive monthly deficit, indicates a contrast to concerns. This deficit is largely attributed to strong imports of capital goods, intermediate inputs, and energy, driven by expanding manufacturing capacity, rather than diminished external competitiveness.

Foreign Direct Investment (FDI) disbursements increased by 11.8% year-on-year in the first seven months of 2026, indicating sustained investment momentum, even amid rising external headwinds.

In terms of foreign exchange, the USD/VND rate rose by 0.1% to 26,277 yesterday. The British pound is experiencing slight selling pressure against major currency peers, trading 0.1% lower at approximately 1.3420 against the US Dollar during the European trading session on Tuesday. Meanwhile, the Euro (EUR) has gained momentum, breaking above the 1.1500 level against the US Dollar on Tuesday.

The US Dollar faces modest downside pressure due to optimism regarding a diplomatic resolution to the Middle East crisis, contributing to its recovery.