Vietnam Devalues Dong for 2nd Time This Year on Trade Deficit
Hanoi. Vietnam devalued the dong currency for the second time this year on Thursday to support exports and curb import demand which has left it with a trade deficit.
The move had been widely expected after Vietnam recorded a $3 billion trade deficit in the first four months of the year, compared with a surplus of $2 billion in the same period last year.
The central bank said it had lowered the mid-point rate for the currency on the interbank market by 1 percent to 21,673 dong per dollar.
Dollar/dong transactions can move in a band of plus or minus 1 percent around the mid-point, which the central bank sets daily.
“The market had expected this change right after the government released data on the trade deficit,” a money market dealer at a Vietnamese bank in Ho Chi Minh City said.
The previous depreciation was on Jan. 7, when the central bank also weakened the dong by 1 percent to help stabilize the foreign exchange market.
The State Bank of Vietnam said in a statement that recent pressure on the dollar/dong rate was “psychological” and “in market expectations”, saying its latest move was to help meet socio-economic targets and cope with negative impacts from global markets.
“The [market] expectation is more depreciation as the dong is down just 2 percent while other currencies in the region have fallen 4-5 percent now,” he said.
Last December, central bank Governor Nguyen Van Binh said it would keep the dong depreciation to less than 2 percent for the whole of 2015.
After Thursday’s adjustment, the dong fell to 21,650-21,730 per dollar on the interbank market, from 21,620-21,670 the previous day.
Vietnam’s January-April exports rose 8.2 percent to an estimated $50.1 billion, while imports surged 19.9 percent.
The government has projected annual export growth of 10 percent for the whole of 2015, slowing from a rise of 13.7 percent last year.
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Source: The Jakarta Globe