US Treasury Report: Vietnam’s Currency Status

Recent findings from the US Department of the Treasury’s semiannual assessment titled “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States” indicate that Vietnam does not engage in currency manipulation.

This report analyzes the economic practices of key trading partners, which represent around 78% of America’s international trade up to the second quarter of 2024.

The Treasury examines three main criteria to identify potential currency manipulation:

• 1. A bilateral trade surplus with the US should not exceed $15 billion.
• 2. The current account surplus must remain below 3% of GDP.
• 3. Extended one-sided interference in foreign exchange markets is gauged by the net foreign currency purchases by a central bank over a year.

Countries meeting two of these three conditions are placed on a “monitoring list” for at least two reporting cycles. The Treasury publishes this report twice a year.

In July 2021, an agreement was established between the US Treasury and Vietnam’s central bank to alleviate concerns about Vietnam’s monetary strategies. Under this agreement, Vietnam pledged to enhance transparency in its monetary and exchange rate policies while avoiding unfair trade advantages arising from currency manipulation.

The latest assessment reveals that no trading partner has manipulated currency to unfairly influence trade or balance payments.

Currently, Vietnam is among seven nations on the monitoring list due to exceeding two criteria: the bilateral trade surplus and the current account surplus. The other nations included are China, Japan, South Korea, Taiwan (China), Singapore, and Germany.

By June 2024, Vietnam’s bilateral trade surplus with the US had reached $113 billion, making it the third-largest trading partner in terms of goods with the US. However, Vietnam faced a $1.6 billion deficit in services trade with the US.

The current account surplus for Vietnam was recorded at 5% as of June 2024, influenced by variances in goods and services trade, alongside income from overseas workers and investments.

During this evaluation period, the goods trade surplus increased by 8.6%, driven by a resurgence in foreign demand for Vietnam’s manufactured goods.

Additionally, Vietnam’s foreign exchange reserves totaled about $84.1 billion as of the end of June 2024, which constitutes 19% of its GDP. Across the previous year, from July 2023 to June 2024, net foreign exchange transactions amounted to 1.5% of GDP, roughly translating to $6 billion.