How to smudge vector layer in fresco

Not directly, as it would void the aim of vector, in the same way you can't smudge in - say - illustrator (you can apply mathematical effects that can simulate smudge, but they're not the same, not blurry)
You'll need to duplicate and convert that layer to pixel to be able to smudge, but also liquify (distort can be done on a vector layer). In Fresco, vector shapes are meant to be sharp objects.
Nothing can stop you to duplicate and convert a particular layer and smudge the pixel layer on top of the vector layer if you want to smudge only parts of that design...